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Is this statement true?
“If mum and dad provide me with money to buy a home we don’t need to formalise this, as we can trust one another absolutely.”
There are lots of reasons why the ‘Bank of Mum and Dad’ is being called upon now, not just for helping buy a home. It could be for:-
- Help with getting on the property ladder;
- Help with the costs of major home improvements;
- Help with the costs of a wedding;
- Help with legal costs in family/civil proceedings;
- Help financing the purchase of a car …… the list could go on and on ….
Sometimes everyone is clear that the money being provided is simply a gift. In those circumstances there shouldn’t be any problems, as there is no expectation that the money will ever be repaid.
However, often things are not clear cut or circumstances can arise that change the way we see things.
We don’t always like to think about what would happen if things didn’t go to plan. Difficult as it is to do, thinking about things now, could save an inconceivable amount of risk for the future. Risking the money may be one thing but risking the possibility of a serious family dispute and the breakdown of family relationships, is something else.
And often the sums involved are substantial and your family/your parents may be sacrificing a lot in order to provide this financial support.
So what do you need to do if you are considering gifting, lending or receiving money to or from a family member/a loved one?
Disputes around such lending, often arise because they are informal in nature, making the terms unclear. Such disputes can be enormously difficult to resolve. Seeking to look to the law to help when things go wrong is to walk an enormously uncertain, complex and risky road. In a nutshell the legal system requires evidence to prove facts. Evidence usually comes in the form of paper. You may no doubt be able to prove that the sum of money was provided, by the production of bank statements, etc.. Bank Statements won’t, however, tell a court what was intended. Was the intention to gift the money? Was it a loan? Was it intended to give rise to an interest in a property?
And this is further complicated if the daughter or son receiving the money has or subsequently becomes involved with a new partner, or goes on to marry, or separates, or gets divorced, or becomes bankrupt or even, dies prematurely.
The only way to create certainty and to ensure that if the worst does happen it isn’t a complete disaster is to formalise your arrangements with a legal document.
This could be a Contract, a Trust Deed, a Cohabitation Agreement, a Prenup. The document will depend on the circumstances. The important thing is that the document sets out clearly what is intended and that those involved have the benefit of independent legal advice.
Avoid being kept awake at night wishing you had followed this advice, contact us today. And if you have already provided money to a loved one, it may not be too late to formalise the arrangement now.
Calling now, could mean certainty and security for the future, for both you and your loved ones, so what are you waiting for?
Call Alan Simpson or Marsha Edinburgh at Alan Simpson & Co. On 01268 745406
- Published: 7 Feb 2020
- Updated: 1 Nov 2020