July 19, 2024

Vagmare.com

The Intersection of Information and Insight

Top 5 family property fights that divide families, and how to prevent them

7 min read

At a time when the cost of living is sky-high and property prices are on the rise again, many young people and families are under pressure to secure or protect their properties.

The problem is that at times when emotions are heated and financial stress is rife, family feuds, fallouts and arguments easily erupt.

Here are the 5 most common property fights that are tearing families apart… and how to prevent them.

Fight 1: Borrowing from the bank of Mum and Dad

For years the Bank of Mum and Dad has been touted in the media as one of Australia’s largest lenders.

A whole generation of parents has been reportedly dishing out a seemingly bottomless pool of funds to help frustrated first-home buyers get on the property ladder amidst skyrocketing property prices.

A recent report by the Australian Housing and Urban Research Institute revealed that 40% of Australians aged 25-34 are considering turning to their parents for financial help to buy their first property.

But the problem arises when it’s unclear whether the Bank of Mum and Dad is handing out a ‘gift’ or a ‘loan’.

Some assume that the money will be repaid when possible, while others don’t expect to see the money again.

And it can create some heated disputes when the communication goes awry.

How to overcome it

Parents need to be very clear about whether they’re providing their children with a gift or a loan.

If the money is a gift, this should be made clear in writing to avoid confusion down the track.

If the money is a loan, it is recommended that parents write up a loan agreement detailing the size of the loan, the term and how it will be repaid.

It should also detail what will happen should the property owner (their child in this case) be unable to make repayments on the parent ‘loan’, and also if they look set to default on the property repayments themselves.

This is especially important if parents have been used as guarantors for the property purchase.

It would also be advisable to come up with an agreed exit strategy, including if the child wanted to pay off the amount of money borrowed at a faster rate, or in a lump sum.

Fight 2: Making verbal agreements

Many issues arise within families when verbal agreements are made and then each party has a different understanding of what has been agreed, upon or can’t remember the full details.

With property, it can end up with a nasty argument down the track, especially if a death, divorce or illness changes the circumstances for some of the parties involved.

How to overcome it

Write the agreement down, including terms of what has been agreed and what should happen should circumstances change.

This should include everything that has been discussed, with details of who has agreed on what and an idea of the timeframe.

Remember, verbal agreements are as legally enforceable as written ones, but you will have problems when you need to prove they exist.

Your document should cover:

  • Roles and responsibilities of each person rough dates for regular business meetings throughout the year (quarterly, for example)
  • A dispute resolution process for those times when an agreement can’t be made
  • An end-clause for when a party wants to leave the investment.

Family Trust6

Fight 3: Split allegiances of blended families

When it comes to family fights over property, not surprisingly blended families have the most disputes.

And this is because members of that blended family will have allegiance to one parent or side of the family over another.

And, in general, they come from different financial backgrounds with one parent bringing more money into the relationship than the other and they often have different goals and aspirations.

How to overcome it

The best way to avoid family disputes within blended families is to plan your estate properly.

List what will go to who, and ideally put this into a will or legal document.

It should include what will happen to the property (and its contents) if one dies, both die or in the case of a separation.

Alternatively, a family trust can be established to give a surviving spouse the right to live off the income and property for the rest of their life.

The estate would then go to the children, or be divided as agreed when both parents have died.

Alternatively, a couple can set up a tenancy in common, where they each have, say, 50% and each is able to do with it whatever they wish.

As always, proper planning negates the need for a nasty argument down the track.

By the way…the team at Metropole Wealth Advisory specializes in helping families set up their affairs to minimize disputes.

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © All rights reserved. | Newsphere by AF themes.