Helping DD get on the property ladder

[Theoreticalquestion]

Theoretically at the moment (as daughter is still at school)…

We’ve been thinking ahead about helping our only child get on the property ladder when the time comes. Hopefully we will be in a position to put down 50% deposit and would rather help her at the start of her adult life rather than waiting for inheritance.

My worry is. What would happen if she married and subsequently divorced? How do we protect the assets?

I know this may seem a bit premature but I’d rather get it sorted before she even has a partner in mind. It then takes away any awkwardness that it’s about not trusting that particular person.

This is a genuine concern as my own extended family have all been divorced so I am probably hyper aware of financial implications of divorce. We are wanting to help our daughter have some financial security and don’t want our hard earned money being part of a (theoretical) divorce settlement.

Any advice would be greatly appreciated 😊

The most basic answer is that it’s complicated. Prior to marriage your DD could have a prenup drawn up which reflected her proportion of equity in the marital home; courts increasingly view prenups to be binding providing both parties have taken legal advice beforehand. However, ultimately divorce settlements also consider the financial position of both parties post divorce. If there’s enough money in the pot to do that whilst acknowledging the greater assets one partner contributed prior to marriage, the prenup will stand. If there isn’t then a court wouldn’t see one party walk away penniless - especially if they were the one with residence of any children - and would look to waiver the prenup.

Alternatively, you could buy a property along with your DD as tenants in common, thus protecting your investment as you would own a share of the property that could not be considered in a divorce settlement. That would likely prove complicated longer term, however, as many partners would find it awkward.

My parents did this for me OP. When my husband (then boyfriend) moved in my dad did ask if I wanted to protect the assets but I took the view that when we married I would be sure that he was a decent man.

And when we had children I didn't want him to be deprived of assets under any circumstances.

So I suppose what I'm saying is if you marry you go in with your eyes open and you accept the 50/50 split of assets but you trust your partner to behave decently?

Also it works both ways. When his parents unexpectedly died we shared the inheritance to buy a bigger house. So assets can go in both directions.

If you teach her to be careful she will hopefully make good decisions.

Following as am considering similar. Hadn't even thought about the marriage and divorce aspect 👀

Imagine her future DH comes along. He wants to make her sign away any rights to a marital asset? How would you feel about that then?
It’s going to cut both ways. Also, she might not want to do that. You cannot make an assumption, and a decision for her, about how to run her financial relationship with her spouse.

Thank you all for your advice. It’s really helpful and food for thought.

Just to be clear I’m thinking of the initial investment. I absolutely understand anything during the marriage would be shared. So perhaps a prenup is the way to go.

I really appreciate you all taking the time to respond

@fiskette you make a valid point. She is already very sensible and responsible so I’m probably doing her a disservice. I suspect my nervousness stems from all the divorces I’ve seen around me. Despite the fact I’ve been happily married for 20 years.

I would take advice on options re using a trust, or recording it (legally) as a loan. This has happened with some fairly wealthy relatives of mine that gave offspring huge deposits against houses for them to marry, divorce and the spouse walk away with the lot! For the third child, they took advice and I believed used a trust which protects the asset. Is more reliable than a pre nup, but a prenup is prob still a good idea.

However, your daughter might not want a prenup but doesn't have much say over the trust as is your decision. But you will incur legal costs

I was the 'child' in this position, gifted a large deposit for my first home back in the 90s. I did get married and subsequently divorced. I had a documents drawn up by solicitor prior to marriage which stated what was my asset that I was bringing to the marriage (aka everything prior to the marriage as ex husband didn't have a penny, whole other story). So when ExH decided to go shagging around and I divorced him, the document meant he didn't contest it. I was also advised that because I had stated that the deposit was my parents interest, that bringing a third party into divorce proceedings would be a significant legal fee and fortunately neither myself or ExH wanted to do this.

I am remarried and actually now several children later have just had a new document drawn up with DH, who earns more than I do. The document reflects what I have bought to the marriage (ie the existing equity) and the division of future equity (based on our uneven input). I basically would get 75% of the asset vs DH 25% but you can also do it as set figure ie 200k bs 50k but that's a bit more complicated.

I think I am digressing.

Ultimately just keep in mind that prenups in the U.K. are not binding, only 'persuasive' and the extent to which they are persuasive depends on whether both parties had the opportunity for seperate legal advice prior to marriage, and the balance of power eg If one party is significantly wealthier than the other and whether reasonable provision has been made for the other party so they don't leave with nothing. Basically what I'm saying is do not rely on a prenup in the U.K. being binding.

Your daughter and her partner could buy as tenants in common - they would both own a specified proportion of the house and in the event of a split, the proceeds would be shared accordingly.

My husband and I have done this - my initial deposit is protected so I would receive that, then any other equity would be divided equally.

It is very tricky.

I am also in a similar situation.

I have recently got divorced and so have money to give to my kids for house deposits.

U.K. courts (currently) cannot be bound by pre-nups.

This is because the divorce laws are set up for best interest of the children. So if there are children of the marriage then they need to be housed and this is prioritised

If there are no children then in a short marriage the intention of most courts is to put people back where they were and split assets accumulated during the marriage.

Only for medium or long marriages are the assets usually split between both parties.

Personally I have decided I would rather my money benefits any (potential) grandchildren and also I don't want to piss off any long term partners of my children.

I am generally happy with the guidelines of how the U.K. courts divide assets on divorce so I have decided not to do a trust or similar.

This happened to me. I bought a home with my boyfriend and my parents gave a lump sum. We were asked if I wanted to protect that with a Deed Of Trust, which I almost didn't do as 1. I trusted him 2. I didn't want to spend £250.

But I did it as his family were a bit dodgy and i worried if anything happened to both of us it wouldnt return to my family. Roll on time we married, divorced, and that bastard would have taken every penny he could.

The ring fenced money was taken straight off the table thankfully although he gave it a good try. However it technically still belonged to my parents, hence why he couldn't touch it, so not sure if you have inheritance tax implications if its the only way.

Unfortunately many women are duped into believing that their husband is a decent man.
Mine ran off with a wealthy friend shortly after discovering that there was no fat inheritance from my parents.
12 year long con, 3 children too.
I'm very happy for you, but please don't sit there thinking that the rest of us are stupid. I have never fully recovered financially from the things he did.
Legal protection matters.

Please read my reply to fiskette.
Please do not blindly believe that your sensible daughter could not be cheated financially as well as emotionally. That in itself would be the naivety.

Yup. Ring-fence it, you don't know what the future holds. I'd never, ever have thought I'd divorce or what lurked beneath my ex husbands facade. Big risk to gamble thinking you'll benefit financially from your spouse.

I'll never let my own kids walk the aisle without a hefty session at the solicitors!

Thank you all. That's so helpful.

You're so right @hashbrownsandwich and @Iona345 . That's what I'm thinking. You never know what might happen and it's our daughter who I want to protect and to benefit from our hard work/earned money.

@Sunflowergirl1 Yes - I was wondering if this was an option.

I will definitely heed your warnings and trust my gut to make sure she is protected should a divorce happen. Like I said in my original post, I'd like to make it so from the start so no prenups cause any awkwardness. Especially if it's not legally binding.

A properly executed prenup will be followed by the courts unless it is clearly unfair in the situation, e.g. it would leave one of them in financial hardship or there are children of the marriage who have not been adequately provided for.

That's very generous of you and I'm jealous of your daughter! I advise that she does not marry someone, he will almost certainly have a right to half her property.

Prenups are gaining popularity now but they rarely hold up in British court.

This is wrong. Prenups almost always hold up in the courts provided there was full financial disclosure, both parties take independent legal advice and neither of them was put under undue pressure to sign.

@prh47bridge "This is wrong. Prenups almost always hold up in the courts provided there was full financial disclosure, both parties take independent legal advice and neither of them was put under undue pressure to sign."

How do you prove they were not pressured? All it takes is a spouse to claim she was threatened with no marriage or some other claptrap that results in huge legal fees etc? Whilst as you can see I didn't discount the prenup as sensible as a twin track approach, a trust arrangement is much more within the parents control and not some star struck in love offspring who decides they don't want a prenup.

As long as the prenup was signed at least 28 days before the wedding, you don't have to prove they were not pressured. They have to prove they were pressured if they want the courts to ignore the prenup.

@prh47bridge What if there are 3 children and she is the higher earner in a needs based divorce? My understanding is that the prenup would then be worthless, as they are living together in the family home it is therefore a marital asset that can’t be ringfenced.

@Mumof3confused No, that is not correct.

Since Radmacher vs Granatino was decided by the Supreme Court in 2010, the position is that, provided there was full financial disclosure, both parties take independent legal advice and neither signed under duress, the courts will follow a properly drawn up prenup in any divorce settlement unless it fails to make adequate provision for any children of the marriage or would leave one of the parties in financial hardship. Even then, they will stay as close to the terms of the prenup as they can.

The fact that the family home is marital property is irrelevant. Everything covered by the prenup would go into the pot to be divided between the parties if there was no prenup. So, provided the 3 children are adequately provided for and her husband would not be left in hardship, the prenup would be followed.

I wish I had done this.

My daughter is in process of completing her D81 form for financial settlement, her husband had stated that he might have to leave work in years to come due to a shoulder replacement . Regarding her circumstances she wants to put that she will be looking after her 13 year old son for years to come & also faces the possibility of being a caret for her 77 year old mum . His solicitor has said she cannot put this . Is this correct