Protecting Your Legacy
Helping your children financially, often called the “Bank of Mum and Dad” (BoMaD), is a generous act, but it’s crucial to consider how it affects your estate planning. Without clear planning, these arrangements can lead to family disputes after you’re gone.
Gift or Loan? Document Everything
The biggest issue is often whether the money was a gift or a loan. Legally, money given from a parent to a child is usually presumed to be a gift unless proven otherwise (the ‘presumption of advancement’).
If it was intended as a loan but not documented, it may be treated as a gift, in turn impacting how your estate is divided. It is important to always document the arrangement clearly, stating if it’s a loan (or gift), the terms, and any repayment expectations.
Updating Your Will is Key
BoMaD arrangements directly impact your Will. If you’ve helped one child, do you need to ensure fairness among all your beneficiaries?
Your Will may need updating to reflect any loans or significant gifts. You can specify whether a loan should be forgiven upon your death, deducted from that child’s inheritance, or repaid to the estate for distribution. Ignoring this can cause significant conflict and potential legal challenges to your Will.
Seek Independent Advice
Segelov Taylor Lawyers can assist in ensuring that your WIll properly reflects what has occurred, and what you intend to happen once you have gone.
Before providing funds, parents (and the receiving child) should consider the need for independent legal and financial advice. This can ensure everyone understands the implications, protects relationships, and secures your estate intentions.