A deed of trust for son's house purchase

Forumnewbie

Our son and his girlfriend are buying and we are gifting our son £100k towards the purchase. He says the mortgagor will not accept a 3-way interest in the house - it must be only theirs.

1. How can we ensure he gets the £100k (+ interest/losses?) himself if they split up?

2. What are all the scenarios (for goodness sakes!) and does anyone have a solicitor for this or has gone through this themselves - as a parent donor or a girlfriend/boyfriend buying?

3. What does our letter regarding gifting have to say?

4. Also are all the costs like stamp duty, solicitors, survey etc all divided 50:50 between them?
My head hurts...

Richard_Webster

A gift is a gift and not a loan and therefore if he chooses to allow his girlfriend to have the benefit of it without any agreement/deed of trust between them, that is up to him.

Essentially why are they taking on the huge commitment of buying a house together if they are not prepared to commit themselves to each other in marriage? That's the question I would ask.

OK, marriages break up but if they are insufficiently committed to each other to get married in the first place doesn't that carry the seeds of a problem?

I know there are a few people who have a principled opposition to marriage and genuinely feel their commitment to each other is sufficient - but in the real world they are very much the minority. In most cases it is lack of certainty about commitment or fears about the cost of it, but marriage shouldn't be expensive - it is only the US style wedding industry that would have you think that...

bouicca21

A gift is a gift. You can't make it a gift one minute and a loan the next. I suspect that the only way he can protect himself is by buying in his sole name. Live in girl friends have less rights than wives.

Another possibility, depending on the lender's attitude is to buy as tenants in common and specify in what proportion.

You might want to think about another scenario - what effect would any financial arrangements that are set up now have on the housing/welfare of your as yet unborn grandchildren?

booksurr

this question comes up a lot hence the somewhat jaded responses above. The lender will require a letter from you stating it is an unconditional gift otherwise it will affect his ability to borrow if the lender treats it as a loan repayable to you

the money is "his" since it is a gift from you to "him" not "them"

as such his options are:
1. treat it as being "theirs" and take the consequences when they (inevitability?) split up

2. use a solicitor to set up a tenancy in common and define whether his 100K is protected as a lump sum (declaration of trust) before the house proceeds are split in accordance with the TIC proportions or in fact gives him a higher ownership share to start with (and in the latter case a risk he will not get back the full 100k if the property loses value)

married or not as soon as "she" contributes to the mortgage she gets beneficial rights to the property

http://www.adviceguide.org.uk/england/relationships_e/relationships_living_together_marriage_and_civil_partnership_e/living_together_and_marriage_legal_differences.htm

http://www.adviceguide.org.uk/england/relationships_e/relationships_relationship_problems_e/relationships_relationship_breakdown_and_housing/relationships_if_you_live_with_your_partner_-_relationship_breakdown_and_housing/relationships_if_you_live_with_your_partner_and_you_own_your_home_-_relationship_breakdown_and_housing.htm

http://www.theguardian.com/money/2013/mar/09/cohabitation-agreement-essential-non-married-couples

Senior_Paper_Monitor

1) There are lenders that will accept a three way (oven four) interest in the property - perhaps you should be sourcing one that will (if you want the gift to cease to be a gift and remain to your benefit ?).


2) The lender has absolutely no interest as to whether 'joint tenants' or 'tenants in common' is used.


3) For a deed of trust to be effective this must be 'tenants in common'. Tenants in common can provide some level of protection for the 'gift' proportion remaining to your son's benefit but it is a fairly blunt tool over a range of circumstances and time - a 'deed of trust' provides a much more effective and detailed control over the subsequent 'divi up' in a separation scenario.


I get an impression that there is some reluctance to commission professionals (in both selecting/structuring the mortgage and setting up the ownership/separation side) - this may be a major mistake on your parts.

ognum

Forumnewbie wrote: »

Our son and his girlfriend are buying and we are gifting our son £100k towards the purchase. He says the mortgagor will not accept a 3-way interest in the house - it must be only theirs.

1. How can we ensure he gets the £100k (+ interest/losses?) himself if they split up?

2. What are all the scenarios (for goodness sakes!) and does anyone have a solicitor for this or has gone through this themselves - as a parent donor or a girlfriend/boyfriend buying?

3. What does our letter regarding gifting have to say?

4. Also are all the costs like stamp duty, solicitors, survey etc all divided 50:50 between them?
My head hurts...

I would suggest if you want this much involvement in your 'gift' then don't give it. Make it a legal loan. You are trying to circumvent the requirements of a gift.

I have been here and given substantial sums ( much more than you are giving) and once they left my bank account that is exactly what they were gifts. If you son is old enough and responsible enough to buy a property then he should be responsible enough to know what he is doing.

As a parent it is not your role to decide on how the stamp duty is split it is their responsibility.

Give the money and back off or don't give the money.

ToeDipper

Surely some of these comments are a bit harsh - it's a lot of money and it's understandable that parents would want to ensure that a gift they make to their son remains his in the event that he and his partner split up? I'm assuming here that your son and his girlfriend take a similar view, but that none of you are quite sure how to go about it.

We had a similar situation when my boyfriend and I bought our flat. We had unequal savings to contribute towards the deposit, and my parents also gifted some money to me. For the sake of simplicity, say that I had £10,000, my boyfriend had £5,000, and my parents were gifting £5,000 (total deposit £20,000). We counted my parents' gift as part of my contribution, so I was contributing £15,000 (75%) of the deposit and my boyfriend was contributing £5,000 (25%).

We set up the deed of trust so that if we did split up and sell the flat, the first £20,000 of the sale proceeds AFTER costs would be split 75/25. Everything above this would be split 50/50.

We split all costs 50/50 (bills, mortgage etc), and if selling the flat doesn't clear the mortgage, no one gets any cash and all costs are again split 50/50.

Hope that helps!

penguingirl

What do your son and his girlfriend think? I know you are concerned for your son's interest, but really if he is ready to buy a house he should be able to discuss the options with his girlfriend and a solicitor.

Are they paying the mortgage and costs 50:50? If they are, the easiest thing would seem to be something like a deed of trust saying first 100k and everything else is split. They'll need to consider negative equity- I would say he just gets whatever is left (it may be less than 100k). Obviously the downside of this is that he takes all the risk (possibility of losing equity) whilst she could profit without losing any cash... but they're not planning this an investment, but as part of this relationship so personally I would just accept this. They should really both seek legal advice, and unfortunately as your deposit is a 'gift' you don't have any say in it, but I am assuming that both son and his gf will respect your views given your generosity! I am assuming there is no additional deposit other than the 100k, if there is it would need to be considered in the same way

And there are plenty of people who manage to co-own houses successfully without the need to get married! Yes it involves discussing all the financial options with your partner, but to me that was preferable than getting married because society expects you to.

ognum

jennachameleon wrote: »

Surely some of these comments are a bit harsh - it's a lot of money and it's understandable that parents would want to ensure that a gift they make to their son remains his in the event that he and his partner split up? I'm assuming here that your son and his girlfriend take a similar view, but that none of you are quite sure how to go about it.

We had a similar situation when my boyfriend and I bought our flat. We had unequal savings to contribute towards the deposit, and my parents also gifted some money to me. For the sake of simplicity, say that I had £10,000, my boyfriend had £5,000, and my parents were gifting £5,000 (total deposit £20,000). We counted my parents' gift as part of my contribution, so I was contributing £15,000 (75%) of the deposit and my boyfriend was contributing £5,000 (25%).

We set up the deed of trust so that if we did split up and sell the flat, the first £20,000 of the sale proceeds AFTER costs would be split 75/25. Everything above this would be split 50/50.

We split all costs 50/50 (bills, mortgage etc), and if selling the flat doesn't clear the mortgage, no one gets any cash and all costs are again split 50/50.

Hope that helps!

This is certainly a solution.

If the property went into negative equity did you also agree that you would assume 75% of the debt and your partner 25%. that would after all be fair too!

ToeDipper

ognum wrote: »

This is certainly a solution.

If the property went into negative equity did you also agree that you would assume 75% of the debt and your partner 25%. that would after all be fair too!

Nope, the idea is that we own the property 50/50, except that initial deposit. This includes the mortgage, for which repayments are being paid 50/50, so I wouldn't be at all happy at having to shoulder 75% of the debt if things turned sour!

If we're in negative equity then I suppose you could see it as our losses being unequal, as I would have lost my initial £15,000 contribution as opposed to his £5,000, but at the end of the day, in that situation we would still both be coming away with nothing anyway, so we took the view that it would be more hassle than it's worth to quibble over that one part of things.