How to keep money separate with equity?

Heylou32

Hi! I hope I have posted in the right section and hoping someone can help me please. 

I own (mortgage) a home with my husband. A very dear friend of mine has offered to gift me a large amount of money to pay off a Help To Buy Loan we had to take out to buy the house. 

Although our relationship is secure, my friend would like the money, which will become equity in our property, to be safeguarded for me in case our relationship fails at any point - both my friend and I have had previously been through horrendous divorces. 

Does anyone know of a way that this investment would be able to be protected in my name? Would a solicitor be able to create a contract so to speak that would have any lasting effect? Or is there another way? 

Thank you for your help.

MovingForwards

You are married, I assume for more than a couple of years, there's not his and her money in a divorce it's all one giant pot for sharing.

Your friend could try and do it as a second mortgage on the property. Lend the money, it's repayable as per their terms and secured like a normal bank mortgage. Problem is your bank mortgage lender may not like, or agree, to it.

Decline the offer otherwise you're creating problems with your husband.

kazwookie

Sounds like it could be a can of worms if things went wrong between you and OH.

Say no to your friend.

74jax

I too would say no.

I'm one of the few on here with separate accounts to my husband, but this is a step to far for me. 

Bluebell1000

You might find other advice in the house buying section. 
Could you change the ownership split of the property to reflect you owning a higher % of it? You would need to see a solicitor about it. 

TBagpuss

Heylou32 said:

Hi! I hope I have posted in the right section and hoping someone can help me please. 

I own (mortgage) a home with my husband. A very dear friend of mine has offered to gift me a large amount of money to pay off a Help To Buy Loan we had to take out to buy the house. 

Although our relationship is secure, my friend would like the money, which will become equity in our property, to be safeguarded for me in case our relationship fails at any point - both my friend and I have had previously been through horrendous divorces. 

Does anyone know of a way that this investment would be able to be protected in my name? Would a solicitor be able to create a contract so to speak that would have any lasting effect? Or is there another way? 

Thank you for your help.

You could enter into a post-nuptial agreement with your husband, explicitly stating that the amount of £x (or % of the property value) is to remain yours and retained by you separate from any other split of assets, in the event of a divorce.

Post nups, like pre-nups, are not legally enforceable so there is no 100% guarantee that you would have ring-fenced the money, but they are relevant, and in a divorce, a court has to look at what is fair and reasonable, in all the circumstances, and one thing which is specifically mentioned in the statute as being one of the factors a court can take into account is any prior agreement between the parties.

Generally, the longer you stay married for and the more time passes after the agreement is made, the less weight it will carry, and a court could chose to fully or partially disregard it, especially if there were any major changes in your circumstances after it was made, but it enables a  court to take it into consideration.

It would also be open to you ad your husband to have a declaration of trust drawn up setting out that you each own a separate, Defined share of the family home. Again, a court could divide the equity differently in a divorce but would be entitled to take into account the declaration. Owning as tenants in common in this way also has implications for your rights on death.

You would both need to take separate legal advice in either case. 

That said, it sounds like a very generous gift and you do need to think about whether your friend is seeing it as a no strings attached gift or whether she has an expectation of anything in return, either  financial/practical or otherwise.

It might be better for her to lend you the money (interest free if she wishes) 

Keep_pedalling

A conditional gift is not really a gift, so it would be a thanks but no thanks from me. 

doodling

From a practical point of view, the only practical way to keep the money out of divorce calculations is if the money isn't yours in the first place.  This means that either:

1. Your Dear Friend (DF) lends you the money, secured on the house; or
2. The money is placed into some kind of trust.

Both approaches are fraught with problems.  If your DF lends you the money then when will they want it back? - there will have to be some repayment terms or it will be a gift.  I'm not sure how a divorce court would look at a loan than was only repayable on divorce, probably not very favourably, so you will have to have some real repayment terms.  If the money is a loan then moving house will be a nightmare - most mortgage companies will not accept a second charge on the house from the outset of a mortgage.  If the money is placed into a trust then the trust must be for the benefit of others as well as yourself - if you are the only beneficiary then you can simply void the trust and take the money and I expect a competent divorce lawyer will know that.  A trust of that nature will also have taxation issues.

All the above is before the relationship issues are considered:

1. Is your husband really, really OK with this?
2. If you husband is OK with this now, will he still be OK with it in 5, 10, 20 years time?
3. If you take the money as a loan then all the adages about borrowing from, and lending to, friends apply, your DF may cease to be a F and they may end up wanting the money back (or their heirs might!).

Heylou32

Amazing responses - lots to think about. Thank you all.