Helping DC with house deposit

[whooz]

We plan to help DC with a house deposit when they are ready to buy. DD has a job and some savings and is thinking of buying. She lives in a very cheap area where £120K will get you a 2/3 bed terrace in a nice area.
We plan to give £50k towards the deposit.
Are there any pitfalls to avoid?

Don't die within seven years else it'll form part of your estate for inheritance tax purposes. Document it - a letter is fine, making it clear it's a gift and where you sourced the funds from, include a copy of bank statement if savings. Latter because mortgage lender and solicitor will need to assure themselves the deposit was gained legally.

We will be below IHT, unless the rules change dramatically.
Letter , yes, I wondered whether the mortgage lender would want to know where the deposit came from.

Think about what happens if she marries somebody you don’t like/trust: he could get half the house including your deposit. You can protect against that, a property solicitor can set it up for you so she always retains that proportion of the house value plus half the remainder.

We received a financial gift towards our deposit. The mortgage company required a signed statement from the people who gifted the money declaring it to be a gift and that they had no legal hold on the property.
The mortgage company provided the forms for them to sign

I think the money needs to be in your DC's name when they arrange the mortgage. And it has to be a gift not a loan. Don't know how you prove that other than just saying so.

Not related to your generous addition but depending when she’s thinking of buying it might be worth her looking at this
www.gov.uk/affordable-home-ownership-schemes/help-to-buy-isa

PalePinkSwan that's interesting, though wouldn't that be viewed as keeping some kind of hold on the money?

Yes, the lenders through your solicitor (if the daughter gets a mortgage) will want the parents to confirm it is a gift not a loan which scuppers plans to protect it from a greedy divorcing spouse in a few years' time.
That is what you weigh up.

I may be possible to get a mortgage whilst declaring it as a loan not a gift to protect against the divorce angle but the lenders may not allow that. If your estate is not withint the inheritance tax limits then it is the child's divorce rather than inheritance tax which will probably be your main issue.

There's no mention of her getting married..... If she does she'd need to take advice about how to protect her interest in the house anyway, regardless of her parents gifting her some money towards it. And that's for her, not the OP, to sort out if she does get married in the future.

Good point but I still thought about the issue when giving money to my unmarried then and still unmarried children. They might marry in future.

Xenia What did you decide to do?
DH raised this very point when we last did wills. The answer was that once you've handed over money (without trusts) you can't dictate how it's spent.
No wedding on the horizon

protect it from a greedy divorcing spouse in a few years' time

This is the risk. If the daughter marries I hope she gets a prenup.

Prenups aren’t binding in the uk. But when the DD marries she can specify how much of the house her husband owns, a property lawyer would be best placed to help.

Please do what pinkswan said.

I had the same from parents. When we bought the house (with partner, not married) it was written in that I owned 60% of the house and him 40%.

Yes, we had a deed of trust drawn up, too. We specified actual amounts rather than %s, as anything from that point forward we considered 50-50 (but that was me being generous).

Yes be careful with pre nups although if both sides have solicitors, they are fair to both sides, both sides fully disclose everything, they allow for all future events like one party not working, children etc etc then they may well have indicative force.

(What did I do? i have given each of the older children a bit of money for housing - paid direct to the lender or solicitor but I have not sought to control it after that; although I would be pretty cross if they sold the property and spent the money on gambling or cocaine or a fast car. I trust them enough not to do that and I did encourage them to make wills too).

As people are saying if you are not married you can certainly specify the shares you hold property in as tenants in common.

prenups can and are often set aside if a fair settlement cannot be reached.

A case i had a few years ago had a pre nup protecting her 4.5 million worth of properties. They were married for 10 years (they lived in one of the properties covered by the prenup). She cheated and wanted a divorce she thought that see could keep the 4.5 million of the properties, take 80% of the savings and 50% of his modest pension.

(she does not work as all her income 150k+ comes from rental profits of her portfolio).

So the assists she wanted was
4.5 million of her houses
80% of their 100k savings
50% of is 150k pension.

(she tried to high ball him and apparently was willing to settle for 60% of the savings).

The judge set aside the prenup as the settlement would not be fair (aka she walks away with nearly 5 million in assists he walks away with less then 120k (with the majority of that being in pension fund so worth much less the assists and liquid money)

Judge ruled that he gets 1.5 million of the house portfolio, he gets 50k of the saving and keeps his pension pot whole.

(she still got most of the assists but it was much much fairer then what she was wanting/ suggesting as prenups are not water tight espically after a fairly long marriage 10years in this case).