Questions about gifted money towards house deposit and ISAs

haypea33

My partner and I are looking to buy our first home. We will both be contributing an equal amount to the deposit and his mum is gifting us £12,500 towards it too. She has stated that it isn't a gift to my partner, but both of us as a family and in the event we do split up one day she would like the deposit % relative to the house sale price to go to our son. 

My question is:
1. How would we make sure legally her gifted money goes to our son and not one of us? (Is this what a trust declaration is for?)
2. We are planning to split the £12,500 and put £4000 each into our ISAs (we both have seperate ones) to get the government top up as we are first time buyers. Then at the start of the new tax year in April do it again to get another top up with the remaining. I'm confused as to whether this will be allowed, as I understand you have to declare a gifted deposit when taking out a mortgage? Is gifted money for a mortgage even allowed to be put into an ISA?  

Thanks and sorry if they are stupid questions!

Hayley 

user1977

It's not a "gift" if she's attaching conditions to it (and probably wouldn't be acceptable to a mortgage lender either).

RAS

Mum will have to sign documents stating that her gift is completely free of conditions.

haypea33

How would we get round this then? We have had a discussion and would like the money she gifted to go to our son too, not us. In the event we split up, could my partner, because its his mother, take the money she gifted back for himself? Or would he be prevented from doing this as its a "gift"? We would prefer to be sensible and get some protection over it. 

Hoenir

Speak to your solicitor regarding having a Declaration of Trust drawn up. This is a legal document that defines how the equity in the property is to be divided in certain circumstances. 

haypea33

Could we get a declaration of trust to say that £12,500 (or relative percentage) goes to our son instead? I need some further ideas alternatives as I am new to this.

haypea33

Thank you! Appreciate that. 

Also, can gifts be put into ISAs?!

Hoenir

haypea33 said:

Could we get a declaration of trust to say that £12,500 (or relative percentage) goes to our son instead? I need some further ideas alternatives as I am new to this.

The DOT can be drafted to say whatever both parties are agreeable too. Worth thinking through what the main objectives are before speaking to the solicitor. 

PRAISETHESUN

The gifted deposit is completely separate from any distribution of equity in the property. The gifted deposit is exactly that, a gift. Once given the recipient can do whatever they want with it and the gifter can't really do anything about it. They would be free to put it in ISAs, or they could even decide to not purchase the property and just keep the money if they really wanted! Any attempt to put conditions on the gift will likely not be accepted by a mortgage provider. You could of course have an unofficial arrangement, but it wouldn't be legally enforceable if push came to shove.

Separately though you can then register the equity in the property in any ratio you wish to protect the equity of the actual owners, but this still doesn't provide any real protection for the gifter. It can be set up in such a way as to protect the monetary value of the gift (eg. on sale of the property, split equity such that £12500 goes to person A, and then split the remaining proceeds 50/50) but it still doesn't require the recipient to give the money back to the gifter.

haypea33

PRAISETHESUN said:

The gifted deposit is completely separate from any distribution of equity in the property. The gifted deposit is exactly that, a gift. Once given the recipient can do whatever they want with it and the gifter can't really do anything about it. They would be free to put it in ISAs, or they could even decide to not purchase the property and just keep the money if they really wanted! Any attempt to put conditions on the gift will likely not be accepted by a mortgage provider. You could of course have an unofficial arrangement, but it wouldn't be legally enforceable if push came to shove.

Separately though you can then register the equity in the property in any ratio you wish to protect the equity of the actual owners, but this still doesn't provide any real protection for the gifter. It can be set up in such a way as to protect the monetary value of the gift (eg. on sale of the property, split equity such that £12500 goes to person A, and then split the remaining proceeds 50/50) but it still doesn't require the recipient to give the money back to the gifter.

Thank you for this information. So am I of the understanding that we (as our son's parents) can decide using a declaration of trust that £12,500 will go to our son in the event that we split up?  But it would be an agreement between us (not a condition of my mother in law) and informally it would be to respect my mother in laws wishes? 

FlorayG

It might be easier for you to understand if you are clear that the money from his mother is a gift. She gives it to you both; it's yours now. You can do whatever you want with it, buy a house, spend it, burn it in the back garden.
So you then decide to make provision for your son out of YOUR money. Whatever your partner's mother wants is LEGALLY irrelevant, but you can of course do what she has asked you to do. It's just that she can't insist, it's you and your partner's decision