Splitting house ownership unequally

Halmor

My wife and I are in the process of buying a house for 350k. Much of it will be funded by an inheritance she has recently received of 220k, the remaining cost a joint mortgage between us. 

Because she is contributing considerably more to the purchase her parents wished for this to be reflected in the legal ownership of the house, in case our marriage should ever go pear-shaped. I had no problem with this and the ownership will be split 80%-20% should everything go through. 

This seems perfectly reasonable to me. My only issue is that we have children and bills etc. and I don't like to think of our money as 'separate' and so virtually all of my wages go into a shared pot. This means that I can't really save money as an individual. So, in the event of a divorce between my wife and I in the future, I will have only a small stake in the house and little in the way of personal savings, having been putting my money into a joint account. 

Is this situation fair and as people would expect it to be? It may very well be, I am just unsure. And if not, how else would somebody recommend arranging this more equitably?

davilown

I think inheritance can be looked at as a joint asset in divorce, so regardless of who’s name has what %, a judge could disregard this to ensure any settlement meets the needs of both parties.

Is this an actual inheritance though or a gift from parents? That could possibly change it to being a joint asset. Are the parents dead? If so she could ignore that wish unless it was somehow stipulated legally in a will.

As for the moral side of this, I wouldn’t be very happy if my wife decided to do this.

stig

You do realise that whether your wife keeps her inheritance in “her” bank account or as a greater share of the family home, if you do split up after anything other than a short marriage it will all go into the same pot as assets of the marriage, and the default starting point will be 50:50.

Does your wife earn as much as or more than you, or does she rely on what you put into the “shared pot” to pay bills etc? If the latter, then no, it’s not fair that you’re expected to share your money but she gets to keep hers.

I know in some cultures it’s expected that the man will pay for the household expenses and anything the wife earns is her own - we don’t know if that applies here.

But in my case, We’ve lived mostly on on my income and both had equal access to it for many years with no resentment or ill feeling, and now my husbands unexpected  inheritance is funding my early retirement with his blessing - because we’ve always accepted that a marriage is a joint long term financial partnership. You don’t have to agree with this, but you’re a  unlikely to be happy if the “what’s yours is mine” only works one way.

getmore4less

If you own 80:20  then any house maintenance improvements should also be spit 80:20,  can she afford that?

An alternative approach is to ring fence the money but share the benefits of it equally.

In effect  she lends you £110k interest free you own 50:50 split you pay her back from your share.

Offset mortgage can do that, where the cash offsets(to reduce the interest) but the cash is in her own account.

TBagpuss

If you have a declaration of trust then that would no automatically be binding on a court in divorce proceedings, although it would be relevant and something a court would take into account. Its's likely that it would have less and less weight, over time, so if you divorced 10 years from now it would be likely to be given less weight than if you divorced next year. 

Perhaps you and your wife need to have a discussion about how you manage your finances generally. Do you both earn the same now? Will you each be making equal contributions to the mortgage and all other outgoings moving forward? If not, then maybe the split shouldn't be 80/20, but a different percentage, specially if you are the higher earner and contributing more. 
If you do earn and will be contributing similar amounts then you are no worse off than you have been had she not had the inheritance, it's simply that in the mean time, you will enjoy the benefit of the larger house / smaller mortgager bought with the inheritance.

One option might be for you to build into your current budget, provision for you to each have some individual savings - maybe a regular payment into an ISA from the joint account, for example. Or indeed to put the money that is being saved by being able to have a smaller mortgage into joint savings so that you are building up a cushion to use in future, whether on divorce or simply as the two of you get older. 

Another option might be for you to have a declaration of trust which states she receives the first £220K from the house - this would mean that she wouldn't get a return on the inheritance money but it would give her an element of protection.

Finally, you say that your wife's parents want her contribution reflected in the house ownership - what does your wife want?  This is something which you and she need to discuss and agree on. Of course she is entitled to take her parents advice into account but at the end of the day, it's her money, and her marriage, not theirs. 
It may be that if the two of you can't agree on something that you are comfortable with she would be better off investing the money elsewhere and keeping it wholly separate from the joint, matrimonial assets. She could also decide to use a smaller proportion of it towards the house and invest the balance elsewhere, perhaps with an agreement that the amount invested elsewhere will be excluded in the event of a  divorce. 

Halmor

You have all given me some excellent advice to think over, thank you. 

My wife and I earn similar amounts generally. She has a small business outside of her regular job which is doing very well of late and so she is earning more, yet she will shortly go on maternity leave and so her earnings will drop over time. 

There is no acrimony in our marriage over money and we are both happy to share and contribute according to our means on a day-to-day basis. I understand my wife and her family wishing to guard against me running off with her inheritance from her father in the event of our divorce. It does seem fair enough. I just have to think of the ramifications for me in the longer term, were we ever to divorce, if the house ownership is indeed split 80/20. 

xylophone

I understand my wife and her family wishing to guard against me running off with her inheritance from her father in the event of our divorce. 

And how exactly would you do this?

As there are children and  substantial assets, presumably there would be a formal court settlement in which all assets would be taken into account.

As to the inheritance, (or is it a gift from a living parent?) either it belongs to your wife absolutely or it doesn't.

If it does, she is a free human being who is entitled to take her own decisions to ensure (as far as possible) the best outcomes for herself, her husband and their children.

With regard to unequal shares in a property, tenancy in common and a Deed of Trust could cover this but in a divorce settlement, the court will take all circumstances into account in reaching a decision.