Watching anybody going through a divorce is not for the fainthearted, and when it’s your own offspring it’s hard just to stand by and do nothing.
But how can you help adult children with their divorce?
Let’s say you try to make it all go away for your beloved child, and you put your hand deep into your pocket to help out. Could your generosity back-fire? Well, possibly. Worst-case scenario, you might land yourself in court, either as a witness or as a third party to the proceedings, with arguments over the parties’ future financial resources. Now, instead of helping, you’re involved, and you may have weakened your offspring’s financial claims.
So — what should you do?
Crucially, you will need advice from your own independent family solicitor (and not from the solicitor instructed by your child) – do nothing until you’ve taken that advice! Every case is different, and the risks/benefits of assisting, financially or otherwise, will vary enormously.
A quick summary of the sort of advice you might receive could be as follows:
- Always remember that if the parties divorce, courts tend to assume that gifts and loans from family are “soft” loans and not necessarily repayable, particularly where there is a lack of money to cover basic needs. Your generosity can be swallowed up into the overall settlement without so much as a thank you.
- Maybe now is not the best time to be generous? Perhaps defer it until after the case is resolved? Or if now is the best time, think carefully about whether it is intended to be a gift to both parties, or to your child alone – and if the latter, consider avoiding any risk of it being “mingled” with their family money. Maybe set up a trust?
- Think about whether it should be a gift or a loan? Perhaps you have more than one child and want to be fair to all of them? If so, perhaps a loan makes more sense. Make it as commercial an arrangement as possible, with clear written evidence and consistency in all communications. Instruct your solicitor to draw up a carefully worded loan agreement with clear repayment terms. Consider requiring monthly repayments, perhaps to commence immediately, to underline the nature of the arrangement as a loan, not a gift.
- Security for loans — Think about securing any loan against property, reinforcing the nature of the agreement and creating solid evidence that repayment is expected, keeping your generosity away from their family assets.
- Wills/Inheritance — Think about making a new will. You may wish to set up a discretionary trust for your divorcing offspring, rather than simply leave it to them.
- School fees — The “Bank of Mum and Dad” seems to lean more and more towards payment of school fees these days. This might be a good way to help the family overall, whilst keeping neutral and focussing on your grandchildren. How far would you want to go with this? You may well want to keep your contributions entirely voluntary. You may expect your child’s spouse/their parents to contribute also, and limit your own contributions accordingly — perhaps providing your grandchildren with other benefits more visible to the children themselves?
- Pre and Post Nuptial Agreements — Almost all PNAs we do these days seem to be initiated not by the couple themselves, but by their parents. Whether the marriage is strong or struggling, such agreements are increasingly respected by divorce courts and it’s always a good idea to create clarity, particularly where you are thinking about offering financial support.
And if that all sounds complex, remember – this is just a starter for ten. It’s a complex area – so make sure you do your homework before writing out that cheque.
If you’d like more tailored advice on supporting grown-up children with their divorce you can speak to a member of our family team today.