Giving your married child a down payment, then divorce

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Also, OP, please be aware that while these sort of structures can be somewhat common, they come with a lot of judgement from random people and voyeurism that can upset your adult child's life. Be careful. There is a LOT of hate towards those with family money, and any perception of that can have disastrous consequences for their careers, their future children's schooling, etc. You should not help them to purchase a home that they cannot afford without your help. It will backfire in a major way.

I come from a family like this and own a small home (1000 sq feet) in a nice neighborhood. DH has an executive level corporate job and I SH. It has been extremely hard for my children to make friends outside of school, and my oldest is homeschooled because private schools are not realistic for DH and I without major sacrifices in our own savings goals. We have tried private schools with family money and the bullying that my kids had to endure over it was awful. People were always trying to find out if my parents were famous (they are not) and spreading gossip about us, including the school staff. And my ILs have a huge problem with the down payment help that my parents offered. That's been fun. I hear about it every time I visit them, and I don't even know how they know.

This is truly bizarre. We're at an "old money" private school and I can't imagine that anyone knows or cares how we pay for it (answer: financial aid). Certainly not enough to bully our kid! I'm also 100% sure that some of his classmates have Grandma and Grandpa paying for school.... and nobody cares. Why would they? Were your kids talking about how rich their grandparents are? Otherwise I just can't figure out how anyone would know or care.

Our experience has been that kids do talk about money in public elementary school. Family money, their own savings, gifts - kids talk. And some do judge. Behavior has to be modeled after what they see in the home.

It might differ depending on the ages of the children. You see this a lot with middle and high school students in private schools. Less so with elementary.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a divorce lawyer. You’re very smart to consider this. Under DC law, property acquired during the marriage by a gift to one party remains that party’s separate property so long as she can trace it out. That means you can’t say things like, “This is for both of you.” You make it clear it is a gift to just your child. Your kid then doesn’t do anything to make it a gift to the marriage (ex. by writing a note “I know you’re uncomfortable with the fact that my parents gave US the down payment but this house is OURS). Keep good records bc if you die, you’re not around to say what your intentions was with the gift.

Documenting the intention that the gift is for my child
is enough?

Thanks.

Yes, it is about sourcing the $$. It has to have an explicit trail and documention. But why assume....it's work to figure it out in a divorce. Get it in writing.

The above responder is not me (the divorce lawyer), but is correct that you want an explicit trail showing the money can be directly traced from you to your daughter alone AND she keeps it separate until it is used. For example, don’t have her take a check from you and deposit it into a joint account and then have the same money wired to the bank at closing. Although she could still trace the money out, it’s much cleaner if, in addition to documenting that it’s a gift to just her, the money never hits a joint account. You also need to discuss with her what happens upon a sale. If she sells the property or refinances and pulls money out. Without something in writing with her husband, if it’s jointly titled, he’d end up with it all.

Look into filing a gift tax return, which, along with contemporaneous notes between you and your daughter, can confirm the gift was just to her.

So what?

If Mary’s father gifts her $200k that she holds in a separate account but ultimately puts down towards the purchase of a house with her husband Joe, it’s still a joint asset per the title. Presumably joe brings money to the table, too—whether for the down payment or monthly mortgage in the coming years.

With your thinking, every McMansion purchased solely by the breadwinning Alpha male with a SAHM wife is solely his house—and we both know that’s not how the law works when it comes to marital property.

Divorce lawyer here - You do not understand what I wrote above and are incorrect in your analogy. In your analogy, If Mary can trace out the $200k gift from her dad, then upon a divorce, Mary gets the first $200k is equity plus or minus any passive growth or loss on that money, before the rest of divided between them.

Even what you wrote about Joe isn’t really correct.

[Anonymous]

Anonymous wrote:If you can't cope with the spouse getting half the house, don't make this gift. It's as simple as that.

This. Save the money for a trust or for grandkids directly if you don't trust the new spouse.

[Anonymous]

Ha! What a difference. When DH’s best friend got divorced, his wife was a SAH mom. Parents of husband gave soon to be ex wife a large financial gift so she didn’t have to rush back to work and could take her time finding a job that fit her needs well. Obviously that is an extreme example. But those parents certainly weren’t fussing over whatever other money they gifted to the couple throughout the marriage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don’t listen to unhelpful PPs OP. I understand your question and had same one when my parents gave me and my DH money for down payment. I didn’t find a proper answer (didn’t look very hard). But I sat down DH and made it clear that if we divorce I consider that down payment as my inheritance and not communal property. Yes, yes I know what everyone thinks, but we are a good couple and if we divorce it will most likely be consensual (if it is not I know I can sit on any promise).

Anyway, just to say that I think it is a very fair question and I hope someone has a good answer for you

Lol. You can consider it proof your right to the throne of Genovia, and if you actually divorce it won't make one bit of difference.

Also, most people think they're "good couples" when they get married. That's why they get married.

Haha. Right? As long as you sat him down and made that clear, then, sure, you're all set. Next question: why didn't he run for the hills at that point?

He is very value driven, a stickler to his word and doesnt care much about money. I know him well (thats why i married him 10 years ago). We could divorce for other reasons (unlikely but not impossible). and based on how we have both ended our previous relationships, how we have dealt with family or work conflicts, however acrimonious it may have been, we have both always cared very much about doing the right thing and being as ethical as possible without letting emotions in the driver seat. More than the actual outcome (i think some people reading this will absolutely understand, others won't because it is not at the center of their values, no judgment, some people value kindness/emotional connection/ empathy more for ex. which is obviously awsome). It is really one of the core value we share.

so yes you can totally laugh and i get it. But i trust him

[Anonymous]

MIL is that you??

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a divorce lawyer. You’re very smart to consider this. Under DC law, property acquired during the marriage by a gift to one party remains that party’s separate property so long as she can trace it out. That means you can’t say things like, “This is for both of you.” You make it clear it is a gift to just your child. Your kid then doesn’t do anything to make it a gift to the marriage (ex. by writing a note “I know you’re uncomfortable with the fact that my parents gave US the down payment but this house is OURS). Keep good records bc if you die, you’re not around to say what your intentions was with the gift.

Documenting the intention that the gift is for my child
is enough?

Thanks.

Yes, it is about sourcing the $$. It has to have an explicit trail and documention. But why assume....it's work to figure it out in a divorce. Get it in writing.

The above responder is not me (the divorce lawyer), but is correct that you want an explicit trail showing the money can be directly traced from you to your daughter alone AND she keeps it separate until it is used. For example, don’t have her take a check from you and deposit it into a joint account and then have the same money wired to the bank at closing. Although she could still trace the money out, it’s much cleaner if, in addition to documenting that it’s a gift to just her, the money never hits a joint account. You also need to discuss with her what happens upon a sale. If she sells the property or refinances and pulls money out. Without something in writing with her husband, if it’s jointly titled, he’d end up with it all.

Look into filing a gift tax return, which, along with contemporaneous notes between you and your daughter, can confirm the gift was just to her.

So what?

If Mary’s father gifts her $200k that she holds in a separate account but ultimately puts down towards the purchase of a house with her husband Joe, it’s still a joint asset per the title. Presumably joe brings money to the table, too—whether for the down payment or monthly mortgage in the coming years.

With your thinking, every McMansion purchased solely by the breadwinning Alpha male with a SAHM wife is solely his house—and we both know that’s not how the law works when it comes to marital property.

You’re misunderstanding the distinction.

I’m not the divorce lawyer poster, but the reason a house purchased with the earnings of one spouse earned while theyre married belongs to both the earner and the SAH spouse is because the income earned by either person during marriage is considered joint property. On the other hand, if the money was earned before the marriage or the House was purchased before the marriage, then it stays separate property upon divorce and does not get divided 50-50.

What the divorce lawyer poster is saying is that a portion of the house purchased with a gift to a separate individual stays separate upon divorce as long as the separate nature of the money is traceable.

A gift to one party of a married couple to purchase the marital home won’t be treated separately. It just won’t.

A pp said their lawyer used it as a negotiating point, but we don’t know the whole story. Oftentimes the breadwinner spouse will be more generous to other spouse—particularly when kids are involved. Lots of men take the high road to keep the STBEX and kids stably housed and provided for.

So, you can try, but it’s not really a “thing.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you can't cope with the spouse getting half the house, don't make this gift. It's as simple as that.

This. Save the money for a trust or for grandkids directly if you don't trust the new spouse.

But Larla wants a $1.5M starter home NOW!!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If you can't cope with the spouse getting half the house, don't make this gift. It's as simple as that.

This. Save the money for a trust or for grandkids directly if you don't trust the new spouse.

But Larla wants a $1.5M starter home NOW!!!

Pathetic enablers

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a divorce lawyer. You’re very smart to consider this. Under DC law, property acquired during the marriage by a gift to one party remains that party’s separate property so long as she can trace it out. That means you can’t say things like, “This is for both of you.” You make it clear it is a gift to just your child. Your kid then doesn’t do anything to make it a gift to the marriage (ex. by writing a note “I know you’re uncomfortable with the fact that my parents gave US the down payment but this house is OURS). Keep good records bc if you die, you’re not around to say what your intentions was with the gift.

Documenting the intention that the gift is for my child
is enough?

Thanks.

Yes, it is about sourcing the $$. It has to have an explicit trail and documention. But why assume....it's work to figure it out in a divorce. Get it in writing.

The above responder is not me (the divorce lawyer), but is correct that you want an explicit trail showing the money can be directly traced from you to your daughter alone AND she keeps it separate until it is used. For example, don’t have her take a check from you and deposit it into a joint account and then have the same money wired to the bank at closing. Although she could still trace the money out, it’s much cleaner if, in addition to documenting that it’s a gift to just her, the money never hits a joint account. You also need to discuss with her what happens upon a sale. If she sells the property or refinances and pulls money out. Without something in writing with her husband, if it’s jointly titled, he’d end up with it all.

Look into filing a gift tax return, which, along with contemporaneous notes between you and your daughter, can confirm the gift was just to her.

So what?

If Mary’s father gifts her $200k that she holds in a separate account but ultimately puts down towards the purchase of a house with her husband Joe, it’s still a joint asset per the title. Presumably joe brings money to the table, too—whether for the down payment or monthly mortgage in the coming years.

With your thinking, every McMansion purchased solely by the breadwinning Alpha male with a SAHM wife is solely his house—and we both know that’s not how the law works when it comes to marital property.

You’re misunderstanding the distinction.

I’m not the divorce lawyer poster, but the reason a house purchased with the earnings of one spouse earned while theyre married belongs to both the earner and the SAH spouse is because the income earned by either person during marriage is considered joint property. On the other hand, if the money was earned before the marriage or the House was purchased before the marriage, then it stays separate property upon divorce and does not get divided 50-50.

What the divorce lawyer poster is saying is that a portion of the house purchased with a gift to a separate individual stays separate upon divorce as long as the separate nature of the money is traceable.

A gift to one party of a married couple to purchase the marital home won’t be treated separately. It just won’t.

A pp said their lawyer used it as a negotiating point, but we don’t know the whole story. Oftentimes the breadwinner spouse will be more generous to other spouse—particularly when kids are involved. Lots of men take the high road to keep the STBEX and kids stably housed and provided for.

So, you can try, but it’s not really a “thing.”

I’m the divorce lawyer. Once again, you are (bolded) 100% wrong. Please do not listen to this person. The bolded part it 100% false as long as the recipient spouse can trace the gift out, and she never commingled the funds in a way that she can’t trace it out — the gift of the down payment and the passive growth or loss on those funds are hers alone.

Example: wife’s parents give wife $200,000 gift. She never commingled it and uses it to buy a home (down payment). When the couple divorces, they have $500,000 total equity in the home (of which $100k came from passive growth, such as the housing market increased in the area).

$500k equity calculated as:
A. $200k gift to just wife
B. $50k passive growth on wife’s separate gift share (Such as growth because of a housing boom caused the house value to increase)
C. $200k marital equity (principal payments over the years, Improvements that increase the value of the home, etc)
D. $50k passive growth on the marital share in C above.

Wife would get A, B, half of C and half of D.

Husband gets half of C and half of D

While it is a little more complicated than this, this is the general idea.

[Anonymous]

This happened to me. I bought a house with my now ex-husband for $280k (not in DC area). My parents gave me $100k that we used to renovate the house immediately after we purchased it. A year later we separated, and then a year after that we divorced.

I was able to convince my ex not to split that money. We had not discussed it when we did the renovations, but we both knew that it wasn’t his money. However, as many posters have pointed out, it came down to trusting that my ex would be a honorable person and do the right thing. If we had stayed together longer, I don’t know how we would have handled it.

During the divorce process, I felt anxious and guilty about what I had done and possibly “losing” half of their money. I felt that I wasn’t a good steward of their money. My parents are not rich, they both grew up poor and worked hard for our family. They have never wasted money and I am the same way.

My parents never said anything to me about the house money...didn’t ask about $, how we split our assets, etc. I was grateful for that.

[Anonymous]

Anonymous wrote:This happened to me. I bought a house with my now ex-husband for $280k (not in DC area). My parents gave me $100k that we used to renovate the house immediately after we purchased it. A year later we separated, and then a year after that we divorced.

I was able to convince my ex not to split that money. We had not discussed it when we did the renovations, but we both knew that it wasn’t his money. However, as many posters have pointed out, it came down to trusting that my ex would be a honorable person and do the right thing. If we had stayed together longer, I don’t know how we would have handled it.

During the divorce process, I felt anxious and guilty about what I had done and possibly “losing” half of their money. I felt that I wasn’t a good steward of their money. My parents are not rich, they both grew up poor and worked hard for our family. They have never wasted money and I am the same way.

My parents never said anything to me about the house money...didn’t ask about $, how we split our assets, etc. I was grateful for that.

Wait...so what happened to the money?

You spent almost half the home's value in renovations and divorced in the same year....did the buyer pay you for $380K+ for the house?

[Anonymous]

PP here. We didn’t sell the house, I kept the house and live in it and pay the mortgage. When we divided our assets, I paid him back his half of the down payment ($14k).

[Anonymous]

My parents are like this. They have set up trusts and helps us with homes with strings attached. I am divorced so whatever but it has cause issues in my sister's marriage. Give it without strings or don't give it.

[Anonymous]

Anonymous wrote:My parents are like this. They have set up trusts and helps us with homes with strings attached. I am divorced so whatever but it has cause issues in my sister's marriage. Give it without strings or don't give it.

Or—accept it with strings or decline it.