I want to help my child buy a house… what happens if my child separates from their partner?

I want to help my child buy a house… what happens if my child separates from their partner?

As house prices increase, it is all too common now for parents to help their child buy a house by contributing to their children’s house deposits. If you are in this fortunate position, either as the recipient or the giver, then we recommend that you obtain legal advice before making any transfer.

All too often the purchase is made when a young couple, happily in love want to take that next big step in life. Often there is little or no conversation about if and when the money will be repaid, and what happens in the event the relationship of the child breaks down.

Parents often assume that if the child’s relationship fails, that because they helped their child buy a house, their child would be able to keep the deposit funds, or that they would be repaid, with or without interest. The partner of the recipient often speaks of the deposit funds as a gift to “both of us”.

If you do not document or categorise the advance of the deposit funds then the deposit funds could be treated as either:

  1. A contribution by the parents on behalf of the child;
  2. A gift to both parties with no significance to the parties contributions;
  3. A loan that is repayable to the parents.

In a long relationship, the contribution by the parents could be eroded to having no significance at all in the family law property settlement.

How the money will be classified in your case, will depend on the facts and circumstances of your case. These arguments are often very emotion driven, and can lead to long and expensive litigation which can lead to very fractured families.

Smart families will obtain advice before the deposit funds are advanced, and talk about their expectations in the event that the relationship doesn’t last, or even what happens when the house is sold.

There are protections available, to keep the deposit funds in the hands of the recipient family. While the preparation of a contract or a mortgage in favour of the gifting parent can result in a little extra cost when purchasing your home, the gifting parent should consider it an insurance policy. 

At Mason Lawyers, we are here to guide you through these issues.  We are conveniently located throughout the Newcastle region.  For assistance, call us today on (02) 4929 4499 or book online.

Kasey Stewart
Kasey Stewart

21 Jun, 2021

The information in this article is intended to provide general information only and does not constitute legal advice. If you require legal advice specific to your particular circumstances, you must formally engage a lawyer or law firm. The law is subject to change, and whilst we strive to keep our content up-to-date, developments may occur after publication. The information contained on our website should not be relied upon or used as a definitive or complete statement of the relevant law. Mason Lawyers takes no responsibility for any use of the information provided. Liability limited by a scheme approved under Professional Standards Legislation.

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