What happens to money lent to us to buy a house if we get divorced?

Q. The ‘Bank of Mum & Dad’ lent us money to buy a house when we got married. Will they get it back now we’re getting divorced? 

A. Much depends on whether the money from your parents was a genuine loan, with a Declaration of Trust or loan agreement drawn up between you and perhaps repayments being made, or whether it was in fact a gift. If the money was a gift which your parents are now claiming was a loan, without proper documentation in place it may be very difficult to show, or convince a court that it should be repaid on the breakdown of a marriage. This is particularly so if the marital assets are modest and minor children need to be rehoused, as the spouse with whom the children live may need a greater share of the marital ‘pot’ in order to rehouse him or herself and the children. Although this type of gift from parents may be classed as ‘non-matrimonial property’ when negotiating a financial settlement, it can still be taken into account in order to achieve a fair outcome. Therefore, parents loaning or gifting money to adult children should always seek appropriate legal advice before they do so, particularly if they are expecting the money to be repaid in the event of a later divorce.