It is common for parents to help their children into the property market by gifting or lending them money but if not properly recorded it can lead to a dispute down the track as to whether it was a gift, or a loan to be repaid. The presumption at law is that where parents have transferred money to their children, and there is no evidence to the contrary, the transfer is deemed to be a gift.
Issues often arise when a child whom they have given money to, for the purchase of a property, separates from their partner/spouse, and that partner/spouse claims an entitlement to a share of the gifted funds by virtue of a relationship property division.
In order to prevent this from happening, a Loan Agreement should be entered into when parents lend money to their children. This should require repayment upon separation.
An alternative option is to record the advance as a gift and require your child to enter into a contracting out agreement, ring fencing the gift as their separate property.
Either way, it is important to record your intention at the outset.
If you have any questions, or are considering gifting money to your children, please do not hesitate to contact one of the TODD & WALKER Law property team members:
Pip Roberts - firstname.lastname@example.org;
Peter Sygrove - email@example.com;
Find out more about our property team here.