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Protecting your assets - assisting children purchasing property

By Michael Bennett - 8 Jul 2019

Your child has found the property of their dreams, but they are a little short on their deposit so you decide to help them out. Before transferring the money, it is essential you talk to us about protecting your contribution.

If your child is purchasing with a partner and you have gifted them money for the purchase of their home, this will likely be treated as relationship property unless they have agreed otherwise. Similarly, if your child buys the property themselves and the property becomes their "family home" for them and a partner, the whole home may be classified as relationship property. Should the couple separate, your child's partner may be able to take half the value of the property. If you have gifted the money, or failed to document your arrangement correctly, this will be included in the value of the property and as a result, half of your gift will go to their partner.

There are various ways to avoid this situation. The couple may agree that the amount of the cash gift will remain the property of your child, should the parties separate within a specified period of time.  Alternatively, some banks will structure a loan so that the parents are part of the borrowing entities.

Ideally the transfer of funds by parents should be documented as a loan, often by way of a Deed of Acknowledgement of Debt. The loan could be interest free and repayable only on demand. This can then be treated as a debt of the relationship, instead of an asset. If the parties were to separate, you could demand repayment of your loan and your contribution would be returned to you as part of the division of their property. If you so choose, you could then loan the full amount back to your own child again to purchase another property.

We have extensive experience in all sorts of different family situations. Come and talk to us before transferring the money and we'll ensure you and your child are financially protected.

Contacts

Michael Bennett

Elise Markwick

 

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