According to the latest research householders over the age of 50 own about 75% of the country’s homes. That’s a lot of equity tied up in property and can create a generational divide with parents and grandparents having too much space and newlyweds looking to start a family not able to afford to buy a first property without assistance or separated couples not being able to create 2 homes for themselves and their children after a divorce.
Our private client solicitors are often asked about estate planning when writing Wills and our family law solicitors are asked for innovative solutions in divorce financial settlements. In this blog, we answer some questions on sharing property wealth with the next generation.
As private client and family solicitors, we come across these types of housing issues on a regular basis:
- A husband or wife is getting divorced and can’t afford, on their own, to take over the mortgage to stay in the family home
- An older couple wants to make sure that their son or daughter can get on the housing ladder but is concerned about their deposit being kept safe from their child’s partner
- A family is thinking of moving in together so there is a three-generation household
- A person is thinking of buying a house and doesn’t know if their partner should be a joint owner or not
- An older person is thinking of downsizing and either transferring their house to a child or gifting money to a child or grandchildren
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No two families are the same and so one solution doesn’t fit every family. Generally, there are several property solutions, for example:
- If a husband or wife can’t afford to stay in the family home after a divorce either because they can’t afford to take over the existing mortgage or to borrow more money to buy off a former partner then a parent or other family member could stand as guarantor to the mortgage
- If a couple want to get their child on the property ladder, they could lend the child money with the loan secured against the house. The loan can suit the family, for example, interest may or may not be payable or interest could be accumulated and only paid if the house is sold
- If three generations are moving in together the property could be jointly owned by all the adults with a deed of trust setting out the details of property ownership or the mid-generation couple could be the legal owners with the older generation having a right to occupy the house
- A person buying a house could either buy jointly with their partner or on their own – if the property owner is in a relationship, they should sort out a cohabitation agreement whether or not their partner is a joint owner or lives at the property with them
- If a person is thinking of giving property or money away, they can do so during their life through what is known as lifetime gifting. Gifts can be made outright or money can be put in trust for family members. Alternatively, the gift could be made outright but protected by the family member receiving the gift asking their partner or spouse to sign a cohabitation agreement or post-nuptial agreement
What property and estate-planning solution fits?
The right ‘’property solution’’ is down to a number of factors, for example:
- Inheritance tax implications of making a gift or putting money into a trust
- The need to protect family money from potential financial claims on the separation or divorce of a family member
- Family circumstances and personal preferences
Given the range of options, it is always sensible to ask for help from specialist private client, estate planning, and family solicitors before gifting money to family members or moving in with a partner. Early bespoke assistance can make sure that you make the right decisions for yourself and your family and protect your loved ones.