We want to lend our son money to buy a house with his girlfriend but they fall out all the time: How do we protect our cash in case they break up for good?

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Our son is currently renting a flat with his girlfriend. We want to transfer him £15,000 for a house deposit so he is not needlessly paying money to a landlord every month.

However, we are concerned that he and his girlfriend will break up in the future as it does seem to be a slightly volatile relationship. She doesn't have any savings to contribute to the deposit.

How can we ringfence our cash in case the worst happens? Can we get a contract drafted or do we need to make our son do it?  

Deposit worry: We want to give our son £15k for a house deposit - but protect it from his partner. (Picture posed by models)

Alison Hawes, of law firm Irwin Mitchell, says: One of the best ways to protect the money you intend to give to your son as a deposit for a house is to make a formal loan - and then secure that loan by registering a charge against the property he buys.

That means if the property is sold in the future your money is automatically paid back, in the same way as a building society mortgage.

If your son is going to take out a mortgage with a bank or building society to raise the rest of the purchase price of the property, then that charge would be paid off first, with yours following from any equity left over.

That avoids any argument between him and his girlfriend if the property is sold. If she is going to be a joint owner because she is not contributing any money then it would be sensible to ask the property solicitor who acts on the purchase to advise your son carefully about a deed of surrender.

She would need to take independent legal advice on this document, which would provide that whilst she lives there she will not acquire a formal interest in the property even if she contributes to outgoings from time to time.

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If the property is going to be bought in joint names, even though she is not contributing to the deposit, then your son should ask the solicitors to prepare a declaration of trust that he and his girlfriend will sign.

That fixes the shares that each co-owner will have in the property in the event that it is sold – that can be fixed shares expressed as a percentage depending on who is making the mortgage repayments.

It could also reflect that when the house is sold, after the building society mortgage has been repaid your son would have the first £15,000 of any equity with anything over and above that then being shared between him and his girlfriend in the proportions that they agree.

That way there can be no argument that the money is his. That is an alternative to a formal charge.

A declaration of trust can also set out the circumstances in which the property might be sold – for example on one person giving three months’ notice to the other, and there then being a period where one co-owner can try to raise money to buy the other out, and have the property transferred to their sole name.

Happy home? There are a number of measures and options you can choose to make the deposit gift work

If the property is owned in anything other than equal shares then your son and his girlfriend will be tenants in common – that means that their distinct shares would pass by their will in the event that one of them died rather than automatically being inherited by the co-owner.

It is important therefore that your son makes a will if they are tenants in common to make sure that his share of the property is disposed of as he would wish in the event of his death. 

The alternative is that they are joint tenants. That means that the survivor of the co-owner automatically inherits the other person's share in the event that they die, regardless of what is said in any will.

Again, a competent conveyancing solicitor will be able to explain this to your son and it is important that he thinks about those implications.

If your son and his girlfriend get engaged and plan to marry then it might be sensible to consider a Pre Nuptial Agreement – prenups involve a certain amount of crystal ball gazing but if properly drafted, including regular reviews in the event of a change in circumstances (for example the birth of a child or one of them being made redundant) it can save a lot of heartache and disagreement in the event that the marriage breaks down.

If you make your son a gift of £15,000 then it is a potentially exempt transfer in terms of inheritance tax – if you survive for seven years from the date the gift, then it will not be assessed as part of your estate for tax purposes.

There are no tax implications of lending your son £15,000 by way of a registered charge. If you charge interest on it, then you may well be liable to pay income tax on that interest but it would be sensible to check with your accountant.

If you decide to protect the money with a formal charge document then you should expect your solicitor to draft that to be reviewed by your son’s property solicitor and your son’s property solicitor would register the charge at the same time as registering ownership of the new property.