Giving large sums of money as a gift, whether for a young person to buy a home or to a partner, comes with a host of financial traps.
Any gift is tax-free, provided the person making it lives for seven more years. So giving a deposit for a home should not normally be taxed.
But, as the case of Camilla Simonsen proves, some financial gifts come with conditions.
”The case — although highly unusual — highlights the potentially messy consequences of gift-giving,” said Rachel Griffin, a financial planning expert at the advice firm Quilter.
The law relating to gifts is that it must be a voluntary transfer of an asset or money, with the intention that the recipient becomes the owner of it. In this context, it does not matter what the recipient does with the gift.
However, if the gift is given on a condition — such as buying a home — that is not carried out, then the person who made it can revoke it.
In Camilla’s case, it had been made clear that the gift was for the rental of a property. The reference on the money transfer had read “Camilla Simonsen Rental”.
If a parent is gifting a house deposit to a couple, they may want to consider what happens if the couple splits up.
If the pair aren't married, and there is no prior agreement in place, the default legal situation is for the house to be split 50:50 — even if one person has paid more towards the deposit. So put it in writing.
“It’s pretty unfair, but a lot of people don’t know that this is the case,” said Harriet Errington, a senior associate at law firm Boodle Hatfield.
“If a person gets a gift from mum and dad and contributes more to the purchase price than their partner, they must get an agreement in writing in case the relationship doesn’t work out.”
When buying a property jointly, but with unequal deposits, it’s possible to set up an agreement saying you will get your original deposit back, or a share of the property, if you come to split up and sell it.
A type of home ownership known as tenants in common, where each person can own different shares of the property, also means you can pass on your share of the property to whoever you want.
This article first appeared in The Sunday Times on 14 September 2019.