With property prices continuing to rise, young people are struggling to get onto the housing ladder. Many parents want to gift a cash sum to their children to help contribute towards a house deposit.
However, many people come to Four Wealth Management as they are concerned about gifting this amount of money to their child in case they end up getting divorced and half of the gift is lost.
Gifts from parents or grandparents to an individual spouse, typically become matrimonial property in England and Wales.
It can be difficult to discuss the possibility of divorce with your child who may be happily married but it should always be a consideration if you are considering making a substantial gift.
Should I give my child cash outright?
If you give your child cash outright, then you do risk losing half of this money if they do end up getting divorced. All cash gifts will be added to the overall matrimonial pot which is divided equally upon divorce. At Four Wealth Management, we can work with you to put a gift into trust which will be safer than giving a substantial gift outright.
Book a no-obligation meeting to discuss setting up a trust
Will my money be protected if I loan the money to my child instead of gifting it?
If you want to loan money to your child instead of gifting it, then this is much more likely to be able to be protected during divorce. However, it is very important that you have formal documentation which states that it is a loan. If it is ambiguous then your money could be at risk of being split in the divorce.
Will setting up a Trust protect a gift for my child?
Putting your investments or assets into a trust is a good way to protect your assets from any possible divorces. At Four Wealth Management, we can help you to put a bond into trust. A trust can specify exactly how the assets inside the trust should be used and who is the beneficiary. This gives you peace of mind and control knowing that the assets you put into trust will be used as you wished. Any assets in trust are not classed as martial property in the event of divorce. A financial adviser at Four Wealth Management can work with you to determine which trust is suitable for your individual circumstances and where appropriate, facilitate the referral to a Solicitor to help set the appropriate trust up on your behalf. Please note that where a referral is made, the service provided will be separate and distinct to the services offered by Four Wealth or St. James’s Place.
Book a no-obligation meeting to discuss setting up a trust
Should my child get a prenup?
A prenuptial agreement (prenup) can be used to protect any gifts that your child received before they got married. A prenup sets out how the assets should be divided in the event of divorce. If your child is already married and wants to protect gifts they have received while married, they can make a postnuptial agreement.
Book a no-obligation meeting to discuss gifting to your children
Tax rules and allowances around gifting are complex and there are also Inheritance Tax considerations to think about. To find out the best way for you to gift assets to your children or grandchildren tax-efficiently while also protecting your assets and keeping it in the family, you can book a no-obligation meeting with a financial adviser at Four Wealth Management. Initial meetings are usually around an hour and can be at your home address, at our Clifton office or on zoom.
Book online now or call us on 0117 973 0500.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
‘Trusts are not regulated by the Financial Conduct Authority.
