You are here: Home - Mortgages -

Trust issues halt business at the Bank of Mum and Dad

Written by: Emma Lunn
Parents don’t always trust their child’s choice of partner, according to NFU Mutual.

While the Bank of Mum and Dad effectively continues to act as one of the nation’s biggest mortgage lenders, its doors aren’t always open if parents don’t trust their child’s choice of partner.

Research from NFU Mutual found that about half (48 per cent) of all parents with grown up children say a lack of trust in their son-in-law or daughter-in-law would affect when or how they would give money to their child – including any help to buy their first home.

The study found that more than a fifth don’t trust their child’s partner, citing them as being ‘money-grabbing’, ‘secretive’, ‘dishonest’ and ‘lacking intelligence’. One in four parents said they’d like their son-in-law or daughter-in-law to be excluded from benefiting from any gifts or inheritance altogether.

A report by Legal and General earlier this week found that gifting money to children could leave many over-55s struggling in retirement.

Sean McCann, chartered financial planner at NFU Mutual, said: “While the Bank of Mum and Dad frequently throws its doors open to help children get on the housing ladder, there are notable exceptions, especially when there is a lack of trust over their child’s choice of partner.

“Like most lenders, the Bank of Mum and Dad is risk-averse. But just because parents don’t trust their child’s choice of partner, it shouldn’t stop them giving money to help their son or daughter get on in life.

“There are plenty of ways to ring-fence a gift, such as for a mortgage deposit, in case a relationship breaks down. However, it’s much easier to do this before sending a bank transfer than afterward.

“The fear of family money ending up in the hands of someone else – be it the taxman or a child’s untrustworthy partner – is very powerful but quite often some simple financial planning can ensure a gift of money will stay in the family. Whether it’s in your lifetime or afterwards, there are many ways you can make sure gifts will only go to the people you care about.”

How to protect a cash gift to your kids

  • If your unmarried child is using a gift from you to buy a house with their partner, a ‘declaration of trust’ can help ensure that if the relationship breaks down, the deposit they paid and the share of the property they bought is returned to them after any mortgage is repaid.
  • Lending rather than gifting money to your child and their spouse allows you set out in what circumstances the loan would be repaid to you. This should be formally documented.
  • If you’re worried about what happens after your death, you could set up a trust in your will. There are a number of options but one of the most common is to give your child a ‘life interest’ in property or investments. This gives them the right to live in the property or enjoy the income from the investments for their life, but not ownership of the asset.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week