Would you celebrate Christmas with your Bank Manager?

November 30, 2017

Don’t let family lending lead to a breakdown in family relations

In the Autumn Budget the Chancellor had some good news for young couples hoping to buy their first home: the abolition of Stamp Duty Land Tax where the purchase price is below £300,000, and a reduction for purchases between £300,000 and £500,000.

Phillip Hammond’s announcement is an early Christmas present for first time buyers just about to exchange on new purchases but the fact is that without ‘the Bank of Mum and Dad’, many young people still don’t have a hope of saving enough cash to pay a deposit and Stamp Duty in today’s housing market.

A recent survey by L&G estimated that last year parents lent about £5bn to their children in order to help fund a property purchase. This huge sum means that ‘the Bank of Mum and Dad’ is effectively now a top 10 mortgage lender.

However, while the relationship between borrowers and bank managers is usually polite but businesslike, young people who receive money from relatives are in a close personal relationship with their lenders, with all the emotions and sensitivity that can entail.

“It’s like sitting down for Christmas dinner with your bank manager,” says Joshua Williams, an Associate and estate planning expert at leading Kent law firm Furley Page.

Joshua warns that this type of lending can lead to complications and even family breakdown. If a parent or child dies and a Will has not been prepared that specifically deals with any interest in such a property or a loan for the property, it may not always be clear what the deceased’s intentions were. This may lead to complications or difficulties that could have been avoided and in some situations it may even result in serious damage to family relationships.

Joshua says: “Bank of Mum and Dad lending means more properties than ever are co-owned. Where this is the case, Wills should deal specifically with any interest in that property or any loan associated with it.”

Joshua stresses that good legal advice is essential.

“Having a properly prepared, well-thought-out Will could avoid many complications and difficulties by ensuring that your wishes are made clear. It will provide comfort to lenders and borrowers that you have dealt with matters in the best way.”

If you would like further advice on Will planning for co-owned properties, contact Joshua on 01227 274241.

Joshua has extensive experience in helping clients with a range of issues, from Wills and Lasting Powers of Attorney to advice on tax. He is a member of STEP (Society of Trust and Estate Practitioners) and also a member of Solicitors for the Elderly, an independent, national organisation of lawyers who provide specialist legal advice for older and vulnerable people, their families and carers.