How to protect family money when your children divorce 

We understand that families often help each other financially and that the prospect of your child divorcing, especially if you have assisted them financially during their marriage, can be worrying.  Here we look at the steps you can take to safeguard your investment if your son or daughter separate or divorce.

Trust funds

One option is to set up a trust fund. This isn’t just something that wealthy aristocrats do. Trust funds are useful vehicles for anyone who wants to ring fence and protect family money. Great care is needed when considering the terms of the trust to prevent it being taken into account in any divorce settlement and expert advice should be sought.

Ownership

Any investment in a son or daughter’s property can be protected either by adding yourself to the title deeds as a part owner or having a legal charge registered against the property at the land registry.  The legal charge is like a mortgage but the repayment terms do not have to be similar to a mortgage.  The charge can be repayable upon sale only or on a specified date or event.  If the parent becomes a part owner of the property their share of the property can reflect the level of their investment.  For example a contribution of 25% of the purchase price can be reflected in a 25% share of the property.

Sharing your land

If a home is being built in the garden for a son and partner to live in, it is really important to discuss all of the “what ifs” before you go ahead.  It can seem like a really good idea and it may well be an ideal solution, but you need to think about what might go wrong and all of the potential issues for the future.  What if you want to move? Can the properties be sold separately? If so, would you want someone else living in your garden? What if there is a divorce or separation? What happens in the event of death?  If money is borrowed to build the home who pays the loan? Who pays for repairs?  If there can’t be separate supplies for the services – who pays the bills? What happens if these payments are not paid?  Make sure all of you go into it the arrangement with your eyes wide open and not “wearing rose-tinted spectacles”.

Loan from the Bank of Mum and Dad

If you are making a loan, however informal, have a proper loan agreement drawn up which you all sign.  Set out the amount of the loan and the repayment terms. This avoids any argument about whether it was a gift or a loan and if it isn’t repaid it will be possible to enforce repayment if you want to. If you make a gift of money, whatever changes happen in your child’s life, you can’t expect the money back.

If you are making a significant transfer of assets to a son or daughter, we would recommend investing in legal advice before you do so to ensure your hard earned money remains within the family. At Harrogate Family Law we can advise you on the best options.

To speak to one of our friendly solicitors for a free confidential chat give us a call today on 01423 594680.

Andrew Meehan is an experienced family lawyer specialising in complex divorces involving significant or hidden assets, as well as cases involving children.

He is recommended for family law by both Chambers 2019 (York, Hull and surrounding regions) and the Legal 500 2020 (Leeds/West Yorkshire and North Yorkshire region).

Everyone’s circumstances are different and this article is provided by way of general information only and must not be relied upon.  If you require legal advice on a family law issue, please feel free to contact us by emailing enquiries@harrogatefamilylaw.co.uk.