Parent/ child property agreements
Recently I have advised young couples who have entered into shared home ownership agreements with the parent or parents of one of them.
One of the agreements was verbal ( therefore unenforceable under property law in most jurisdictions) and the other in writing but it was the verbal one that was working. A major factor in it working was that both couples were still complete therefore the power balance was equal.
Three is a crowd and one will often feel left out or intimidated by the other two. Usually it is the older couple that suffers the loss of a member and the widow(er) who can be left powerless.
Rule number 1: Don’t assume goodwill and equal bargaining power will remain for the life of the agreement.
Age and infirmity will weaken the position of the older person(s) as they become more reliant on the younger couple for support. The care provided by the younger couple will also engender a sense of entitlement which is hard for the older person to meet.
For the older person, appoint a friend or family member not living in the property as Power of Attorney, this will bring in a third party and return some balance to the arrangement.
Rule number 2: Don’t assume the older partners will be the first to go.
Older people are living longer and will tend to live a risk free lifestyle with medical supervision. Younger people will live with greater stress, participate in sports that involve a degree of danger and travel. They also see the doctor less frequently.
When doing your ‘what ifs’ when planning to share a property factor in the older couple surviving at least one if not both of the younger couple. You will be surprised as to the issues that will arise.
Rule number 3: Be careful as to the affect of any shared property arrangement on pension or social security entitlements.
Fully research this aspect as a gift or contribution of money or property that is not properly documented may result in the loss of entitlements or the party having to live on finite savings for a period.
The bottom line is to think it through together and record your agreement in writing.