Protecting Financial Assistance to Family Members Upon Divorce

Very often we encounter situations in which family members wish to help a couple purchase a property together, usually with a contribution towards the deposit. In today’s property market that can be a very welcome boost for getting onto the property ladder and parents or grandparents can gain a lot of pleasure from seeing their younger relative and his/her spouse settled with fewer financial concerns.

However, this enjoyment can quickly turn sour if the child’s marriage breaks down. On many occasions we are faced with a situation where a client says their parent provided money to purchase the marital home and we have to deliver the bad news that, unless something was done at the time to protect that sum of money for the parent, it may well be regarded as having been a gift. As such, it will be absorbed into the marital assets and could be awarded in whole or in part to the other spouse.

The basic position is that, within divorce proceedings, the Court must take all the marital assets into account and divide them so as to produce a fair result for the couple, taking account of various factors such as the existence of children, each spouse’s financial needs and resources, their age, health, etc.

Note that the law does not require the Court to consider fairness to the parents etc who might have provided part of those assets.

For that reason, if you are considering helping out your married child financially it is very sensible to take legal advice to ensure your circumstances are protected as far as possible.

Matters to consider are:

  • Should your name go onto the title deeds to reflect the funds you contributed?
  • Maybe you could have a charge against the property, noted on the title documents at the Land Registry?
  • If the money is regarded as a loan, should a formal loan agreement be drawn up setting out the repayment terms, interest, etc.
  • Perhaps your child and his/her spouse could agree to enter into a pre-nuptial / post-nuptial agreement to try to ensure that your child retains your funds if the marriage breaks down?
  • If you still wish to provide the money on an informal basis, how will this be recorded by the solicitors dealing with the purchase and to what extent will your name and the arrangements be referred to in their file and on bank documents?

All of these options will have important ramifications (such as tax and inheritance) and you should take legal advice in good time before providing the funds.

However, a little thought and investment at this stage could protect you against potentially having to intervene in divorce proceedings further down the line, at considerable cost, risk and disruption to yourself and the wider family.