There are two ways in which this could be significant in your son/daughter’s Divorce proceedings.
One argument that may be made is that the monies advanced by you should be treated as a Contribution within Divorce proceedings. Contribution arguments can be highly relevant in marriages of short duration, and where one party has contributed more than the other party (either from their own assets or family assets). The argument in marriages of relatively short duration is that credit should be given to the party who has provided such contributions either directly or indirectly. This is in essence the same type of argument that is advanced where the matrimonial home was owned by one party prior to meeting the other party.
Whilst contributions can make a significant difference in some cases it needs to be understood that the most important consideration by the Courts is the ongoing financial needs of the parties. It is often the case that the parties’ needs far outweigh the available assets, and in those circumstances, contributions could have little or no effect on the eventual outcome.
The other aspect to consider is whether the monies should be treated as a loan. When Divorce Finances are resolved by Courts, the Court has regard to both parties’ debts. There is no automatic assumption that a debt is a matrimonial debt, and it is for the party who has the debt liability to demonstrate that the money was spent on the house, children or family holidays. If this cannot be demonstrated then it is quite possible that the other party will argue that said debt relates to none of the above, and possibly involves spending on a new partner!
Divorce Courts have also developed the concept of “hard loans” and “soft loans”. A hard loan is money owed to a bank or other commercial entity. In simple terms banks do not excuse people from paying their debts out of the goodness of their heart.
Soft loans are monies owed to friends and family, and whenever soft loans are a factor, it is quite likely that the other party to the Divorce will be arguing that the monies advanced were in fact a gift and not a loan. When a mortgage has also been used to purchase the property, the mortgage lender will generally insist on a letter from the parents stating that the monies advanced are a gift.
The Courts recently gave some detailed guidance on the treatment of hard and soft loans and the Court commented that if a soft loan has the following elements (or some of them) it is more likely to be treated as a repayable loan:
It is therefore advisable to secure any loan to your son/daughter by way of written agreement, and also arrange for and take repayments on the loan. If the monies advanced are to aid the purchase of a property, then a formal charge (mortgage) would be a wise move.
Within proceedings between the divorcing parties the above arguments will be considered by the Court. It is however also possible for the person who has advanced the monies to apply to be an intervenor within the divorce financial proceedings.
The outcome of financial proceedings within Divorce are dependant on many factors, often case specific. At Andrew Isaacs Law we specialise in such matters and are happy to offer fixed fee initial advice appointments prior to taking on your case.