It is somewhat common for a parent to provide funds to their child for use as a down payment on a marital home. The amount is often substantial. Depending on the facts surrounding the transfer of funds, it may be a good idea to document whether the funds are a gift or whether the funds are a loan.
Why is this important?
If the funds are a gift to your child, and the funds are not traceable and/or commingled with marital funds, then used to purchase a marital residence, the funds become a marital asset, subject to equitable distribution in the event of a divorce. This is usually the position of the spouse of the donee. If your position is that the down payment funds were given as a gift, it would be helpful to produce the gift letter and perhaps a copy of the check that the donor signed.
If the funds are a loan, the loan must be repaid. If the house is sold due to divorce, or the title of the house is transferred due to divorce, you may be entitled to have the loan repaid from the proceeds of the sale or transfer. This is usually the position of the child of the creditor parent making the loan. If your position is that the funds were a loan, and therefore must be repaid, it would be helpful to produce an amortization or payment schedule, a promissory note showing the rate of interest charged, and proof of at least some repayment.
This post is simply to have you think about two of the many options you may have when providing a significant amount of funds to your married children.
No two family law matters are exactly alike. Nothing on this family law blog should be considered or used as legal advice. Nothing can replace consulting an attorney licensed in your jurisdiction, regarding your particular family law matter.
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