This is a common scenario in many families where parents or indeed other senior family members help a couple to buy their family home. A lump sum to the couple could have bene made by way of gift or by way of loan. Either way, what is not so common is to document the agreement or intention. Understandably, within an informal familial setting, a conversation about owing or not owing money can sour relations or at the very least, make things awkward. Whatever the feelings, it is essential that such conversations are had to make clear the intentions behind the advance from the perspective of the donor leaving no room for ambiguity.
Whether a family member is about to give away their money or has done so already, there are certain things you can do to ensure that the gift is protected from any claims made by your spouse in the event of a divorce.
Trust Deed – both parties should consider entering into a Trust document recording their intentions. It should make clear that the gift was by way of loan repayable at some point in the future. The deed should be signed and independently witnessed.
Legal Charge/Notice/Restriction – these are a recording of a third party interest on the title register for a property. It is indicative to a prospective buyer that that there is a third party who is claiming an entitlement to a share of the property meaning that the legal owners are not the only people who can benefit.
Become a co-owner – The parties could consider adding the name of the giving party to the title of the property which would legally take their gift outside of the marriage. Owning the property in this way has pros and cons and careful thought should be given before this is considered.
‘I owe you’ – the receiving party could give a simple ‘I owe you’ document which would certainly help as evidence when advancing the argument in court.