Article by Kirstie Brown - 21st May 2014

Protecting Unequal House Deposits

With house buyers needing more family assistance with property deposits due to rising prices and slow wage growth, the problem of unequal shares in a home is on the rise. When looking to buy your home with your other half, how you will split your possessions if the worst were to happen is at the back of your mind.

While many family members are more than willing to help if they can, there is a danger that hard-earned cash may be lost if the relationship were to break down at a later date. Andrew Shaw, head of personal tax at the accountancy firm Kingston Smith, says that the giving of money to a family member is classed as a gift and must therefore be unconditional. This means that the money would be at risk should the relationship come to an end.

In order to secure the money for the individual and so to keep it under control, it would be best to lend the money to the individual for the deposit. Shaw goes on to say "The loan can be interest-free and the terms of the loan should be set out in a loan agreement".

To ensure that the deposit is secure, you and your partner will need to enter into what is known as a Declaration of Trust. It sets out how the property would be divided if the couple split. They can either be ‘joint tenants’ dividing everything equally, or ‘tenants in common’ with different percentages. The document can then be drafted so that if the relationship were to end, the money can be claimed by the original individual after the mortgage has been repaid.

Barry Glazier, partner at law firm Lester Aldridge has advised that both parties should seek independent legal advice, saying, "Getting everything set out in advance can avoid a lot of heartache and expense in the future. It is the sensible thing to do and everyone knows where they stand".

The key is about being honest and open from the beginning and expressing any concerns about your future financial security. By preparing for all eventualities, you can make the relationship stronger in the long term.

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