Giving your married child a down payment, then divorce

[Anonymous]

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

This may shock you, but pretty much EVERYONE thinks they are a good couple when they marry their spouse. People don't marry thinking, "well, that person's gonna cheat on me with a woman 15 years my junior and then try to take the house".

Until it happens. And it does. So, get stuff, all stuff in writing. Even if you are soooo in love now. 15 years down the line is a whole different story.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are the type of in-law that comedy or horror movies are based upon.

If you won't admit what you are doing during your reception toast delivered in front of both families, that should tell you something.

Your bank account is probably huge but your heart sounds very small and sad.

Totally disagree. You can care and love a son in-law but still hold your daughter’s best interests above that of the son in law. Things happen:

- son in law cheats
- son in law does drugs, gambles, stops working voluntarily - all things to deplete the marital assets
- son in law treats wife poorly
- daughter dies, son in law remarries and leaves house to new wife (your grandkids got Zero)
- son in law takes penalty and drains 529s for himself

There are many things that can happen. Ensuring the money doesn’t go where you won’t want it to is prudent and realistic.

I agree with this PP. And I've seen these scenarios over and over again. If a divorce does happen, the same parents will often have to help out. Financial issues always ensue. The OP is ABSOLUTELY CORRECT to consider options.

+1

[Anonymous]

How about when someone posts a reply with their stance, they also (1) rate their personal finance/investing acumen: basic, average, high, or very high. (2) their net worth and HHI. I guess we will see some interesting patterns.

After all, this is the Money and Finance forum.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What a toxic, controlling attitude. A gift is a gift. You should never give anybody money if you're going to get upset over what choices are made after the money leaves your hands. Save yourself and your child the grief.

It's NOT A GIFT. It is a business transaction. People need to understand that buying property is, in fact, a business transaction. Think of it as buying stock in a company.

A Kate Spade purse is a gift. This is a tool. That's all. Not a gift.

It’s just that the original poster called it A GIFT.
Not a financial vehicle, a gift. So there is that .

Daddy can’t have it both ways.

[Anonymous]

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

Even you don't have an answer. That's because the only answer is that you can't protect it. The other spouse will get half of it. If they are nice they can let you have it. That's it.

[Anonymous]

Anonymous wrote:How about when someone posts a reply with their stance, they also (1) rate their personal finance/investing acumen: basic, average, high, or very high. (2) their net worth and HHI. I guess we will see some interesting patterns.

After all, this is the Money and Finance forum.

And it’s also anonymous...

[Anonymous]

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.

[Anonymous]

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

Even you don't have an answer. That's because the only answer is that you can't protect it. The other spouse will get half of it. If they are nice they can let you have it. That's it.

The recipient can absolutely protect it.

[Anonymous]

OP, I have not read the responses; only your post.

You can purchase the home yourself and place it in a family trust and allow your adult child and spouse to live there if they so choose, pay rent to you or not, etc.

Otherwise, if you choose to give them downpayment money, that is your choice. It is a gift, and you have no control over the outcome.

If they decline the offer of the home in a trust, respect their decision.

Your financial status has no bearing on your grown child's adult status.

[Anonymous]

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.

[Anonymous]

Gift with strings are not gifts

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If you have given or plan to give a down payment to your child(ren) who are already married, how do you protect your gift from being taken by the spouse if they get divorced in the future? The house becomes a community property from my understanding.

Do you structure the gift as an interest-free loan that is due upon divorce?
Do you make them sign a post-nup?

We are located in DC, if that makes a difference regarding laws.

You’re a spiteful cheapskate loser op

So your advice is to give $500k and accept the risk of $250k leaving the family in the common occurance of a divorce? That’s not being a cheapskate right?

When you give the money away, it becomes the property of *another* family - your child's. So if he or she gets divorced, the entire $500k does stay withing that family - it's split down the middle.

[Anonymous]

Just buy the house in your name and have them pay the mortgage, in other words they rent it. Since they can’t afford it themselves they should be renting and saving a down payment together anyways. That’s what adults do.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What a toxic, controlling attitude. A gift is a gift. You should never give anybody money if you're going to get upset over what choices are made after the money leaves your hands. Save yourself and your child the grief.

It's NOT A GIFT. It is a business transaction. People need to understand that buying property is, in fact, a business transaction. Think of it as buying stock in a company.

A Kate Spade purse is a gift. This is a tool. That's all. Not a gift.

But the OP is not engaged in a real estate transaction. S/he is giving a gift to a child.

That's patently obvious to most people, no matter how many times you mischaracterize it.

[Anonymous]

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.