By - 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
Elise
Markwick