The Bank of Mum and Dad 25 November 2019 Newcastle | Leeds | - - PowerPoint PPT Presentation

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The Bank of Mum and Dad 25 November 2019 Newcastle | Leeds | - - PowerPoint PPT Presentation

May 24, 2023 152 likes •438 views

The Bank of Mum and Dad 25 November 2019 Newcastle | Leeds | Manchester 2 Housekeeping SSID - WH Visitor | Password - W@rdh4d@w4y30 Newcastle | Leeds | Manchester 3 Agenda How to avoid a legal battlefield with the children (or

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Newcastle | Leeds | Manchester

25 November 2019

The Bank of Mum and Dad

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Newcastle | Leeds | Manchester

SSID - WH Visitor | Password - W@rdh4d@w4y30

Housekeeping

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  • How to avoid a legal battlefield with the children (or significant other) – Is it a gift or a loan

and how do you protect your loan?

  • Claire Simmons, Associate
  • Protecting your Investment in the children (and their home!)
  • Andrew Facer, Partner
  • Protecting a parent’s investment via a Pre-Nuptial agreement
  • Sarah Crilly, Partner

Agenda

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Andrew Facer, Partner

Welcome!

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Claire Simmons, Associate

How to avoid a legal battlefield with the children (or significant other) – Is it a gift or a loan and how do you protect your loan?

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  • Financial gift.
  • A loan.
  • Acting as a Guarantor on a mortgage.
  • Getting a joint mortgage with the child (i.e. buying a property in joint names with the child

but be aware of stamp duty at 3% additional rate).

How can parents help their children on to the property ladder?

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Parents need to consider:

  • Is it a gift or a loan on an unconditional non-refundable basis?
  • Do you expect to have the money returned to you eventually and if so, when?
  • If a gift you have no control over the property as no interest in it.

For example, child could;

  • Sell/share ownership with someone else
  • Re-mortgage

Is it a gift or a loan?

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Legal Charge

  • Legal Charge and Loan Agreement. Be aware of Consumer Credit Regulations.
  • Legal Charge will be registered at Land Registry together with a restriction.
  • Cannot sell/share ownership or re-mortgage without your consent.
  • Consent to occupiers.
  • If mortgage being obtained = Consent to mortgage lender required.
  • Be aware of any fall in house prices/further borrowing.

How do you protect your gift or loan?

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Trust Deed

  • Would "ring fence" any initial percentage contribution made to the purchase price.
  • Can set out responsibility for any outgoings relating to the property.
  • Can set out what will happen to the property if the relationship with any co-owner breaks down.
  • Protected at Land Registry with a restriction.
  • On a future sale of the property following the repayment of mortgage, costs and disbursements

associated with the sale your contribution would be repaid to you/your child.

  • Be aware of any fall in house prices/further borrowing.

How do you protect your gift or loan?

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  • Charles Cornwall has a son Harry from his first marriage. He has since remarried to Camilla.
  • Harry is buying his first property with his girlfriend Meghan Sparkle. Charles wants to give Harry a deposit towards the
  • property. Charles' other son Will and his wife Kate don’t get on with Meghan and there is some family conflict surrounding

this.

  • Purchase price of property: £250,000.00.
  • Mortgage: £180,000.00.
  • Gifted deposit from Charles: £70,000.00.
  • The deposit is disclosed to the mortgage lender who agrees to proceed on this basis. The property is purchased by Harry

and Meghan. After a couple of years Harry and Meghan split up. Harry and Meghan sell the property. Meghan gets 50%

  • f the net proceeds of sale. Charles feels very aggrieved and this has caused a lot of family friction with Will and Kate as

Will feels £35,000.00 of his future inheritance has gone to Meghan Sparkle.

Trust Deed Case Study

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A Trust Deed could have been put in place setting out what the position would be on any future re-sale of the property. The Trust Deed would set out as follows:

  • After the repayment of the mortgage.
  • Following the repayment of any mortgage; and

after the deduction of the costs associated with the sale of the property i.e. legal fees and disbursements and estate agents fees.

  • £70,000.00 would go to Harry.
  • Any increase in the equity in the property would either be split 50:50 between Harry and Meghan or in such other

percentages as the co-owners may decide.

What could have been done to "ring fence" the £70,000.00 contribution Charles has made towards the purchase of the property?

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  • Proof of identity for Charles and Camilla if the monies are coming from a joint account.
  • Evidence of the source of the funds i.e. a bank statement and as to whether the funds are

coming from savings or other in order to comply with AML Regulations.

  • Is Camilla ok with the loan?/should she be informed to take independent legal advice.
  • Disclose to mortgage lender third party gift/loan and Trust Deed.

What would a solicitor need to check with regard to a gifted/loaned deposit?

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Andrew Facer, Partner

Protecting your Investment in the children (and their home!)

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  • The principle
  • Taxation consideration
  • Level of protection:
  • Marriage
  • Cohabitation
  • ‘Lodgers’

Parents Purchasing

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  • The principle
  • Taxation consideration
  • Level of protection:
  • Marriage
  • Cohabitation
  • ‘Lodgers’

Outright Gift

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  • The principle
  • Taxation consideration
  • Level of protection:
  • Marriage
  • Cohabitation
  • ‘Lodgers’

Loan to child

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  • The principle
  • Taxation consideration
  • Stamp duty opportunity
  • Level of protection:
  • Marriage
  • Cohabitation
  • ‘Lodgers’

Trust Purchase

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  • Funding Trust by normal expenditure out of income
  • Partial equity considerations/ loans
  • The holiday home purchase via Trust

Practical Examples

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Sarah Crilly, Partner

Pre-Nuptial Agreements

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  • 42% of marriages end in divorce
  • 45-49 most common age bracket for divorce
  • ne in eight adults are cohabiting
  • Two in three cohabiting couples are unaware that there is no such thing as “common law

marriage”

  • Need for Pre-Nuptial Agreements and cohabitation agreements

Why Protection?

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  • Not binding in English Law
  • Based on state of law at breakdown of marriage
  • No statutory reference to nuptial agreements
  • Case Law

Pre-Nuptial Agreements

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  • Agreement must be contractually valid
  • Signed as a Deed
  • Signed more than 28 days before the wedding
  • Parties must exchange financial disclosure
  • Both Parties must have obtained legal advice before signing

Basic Criteria

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  • Loans to parents
  • Trust Assets
  • Company Shareholding
  • Inherited Wealth

Types of Assets which need protection

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wardhadaway.com @WardHadaway Ward Hadaway Newcastle | Leeds | Manchester