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Protecting the bank of Mum and Dad

It is just over 30 years since my then other half and I both aged 23 bought our first house in Worcester. It was a huge 3 bed roomed terraced property purchased for the enormous sum of £21,000 with a £3,000 deposit and an £18,000 mortgage. These days £21,000 probably won't even cover the size of the student debt a couple in the equivalent position would be carrying.


Young purchasers often have no chance of getting on to the property ladder without parental help. However when the relationship turns sour it is astonishing how many clients cannot show simple proof of loans from parents. Arguments then follow as to whether the money was a gift, whether it was a gift to one or to both of the purchasers. If the money was a loan arguments arise as to whether it was a loan to one or both and what the terms for repayment are. "When you can afford it" is not one of the most enforceable provisions known to law!! Often commercial lenders ask about the source of funds and are not happy about second loans. This can mean that a gift is the only option.


Ideally a solicitor should draw up some paperwork to reflect the true agreement. The cost is minimal compared with the sums involved and the risk to the money given the rate of relationship breakdown. A £500 fee to protect a loan of £25000 is a mere 2% compared with potential costs of $15000 or more if litigation is required.


It is a straightforward legal matter for a "Declaration of Trust" to provide for the return of funds to one party if contributions have been unequal or money is due to be returned to a parent and then for the balance to be split in whatever proportion might be agreed. Deciding what to do can be a difficult conversation and is certainly not particularly romantic because it accepts that things may not work out but it is a much easier conversation than the dispute that may otherwise follow.


For advice on Declarations of Trust or any other family matter please contact Ian Stirzaker, our Head of Family at

We have a dedicated microsite for these matters, meet the team who would be assisting you and watch our latest videos >

Added: 04 Feb 2016 12:24

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