Publish date

10 February 2023

Financial gifts to children or family members, what happens to those gifts on divorce or separation?

In the current financial climate it is becoming more and more common for parents, or other family members to help their children/ family members to get onto the property ladder. It’s completely understandable and often the money is given as a gift, with no intention that it will be repaid. As a parent it is a reassuring to be able to help your children, and it can be marred if you have to think about protecting that gift. It can be off putting to have to consider how or when it should be protected and to spend money on protecting it. Strangely we have less of a problem paying for an insurance policy in respect of other forms of protection.

How are financial gifts treated as part of a divorce or separation?

If you are going to gift your children money, are there any circumstances where you would want the property protected? What would happen if they married and then divorced and that money came part of the matrimonial pot and was divided equally? What if your son or daughter lived with another person and used that money to purchase the property to live in, if that relationship broke down, should that money be protected or would you be happy for it to be claimed by the other party?

Whilst these considerations aren’t easy and can feel cynical, they are likely to be easier to discuss at the early stages then once a relationship has come to an end. As lawyers we regularly try to untangle arguments about money that was gifted or loaned from parents and whether it should be returned. Courts are very reluctant in the case of a parental loan or gift to ring fence that money unless it is clearly recorded in a loan agreement or there is a charge.

Can you protect money you give to your child?

If you are generously gifting or loaning monies, please consider whether you are happy for the money to go a third party in part in the future, or whether you would prefer the peace of mind and certainty of knowing it will be retained by the person you gifted/loaned it to.

If you are the person benefiting from the gift or loan, how would you feel in the future if another person benefited, particularly if it came from your parents?  Would you prefer to be able to make that decision at the time depending on the circumstances, rather than it being imposed?

If it would be helpful to discuss this further, feel free to contact one of our team

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