Parental Fund Support for Property Purchase
The inquiry involves purchasing a property in Western Australia and involves understanding the proper protocols for using funds provided by the client's parents for the house deposit. Questions have arisen about whether the funds need to be moved to the client's account or can be paid directly to the vendor. The legal context includes Property Purchase, Funds Transfer, Real Estate, and Contract Law, focusing on best practices for utilizing non-personal account funds in a property transaction.
Questions about this case
These answers have been verified by a lawyer in the LEAP networkCan a house deposit come from an account that isn't in my name, as long as my name is on the contract?
Yes, a house deposit can come from an account not in your name, such as from your parents, as long as your name is on the purchase contract. It's common for parents to gift deposits to assist with property purchases. However, the funds should be clearly identified as a gift to avoid complications with mortgage lenders. Your solicitor will likely require a gifted deposit letter confirming the nature of the transaction and that there is no expectation of repayment.
What evidence or documentation will I need to provide to demonstrate the source of funds for the house deposit?
To demonstrate the source of funds for the house deposit, you will need to provide a 'gifted deposit letter' from your parents. This letter should confirm that the money being provided is a gift, not a loan. Additionally, you may need to provide evidence such as bank statements showing the funds leaving your parents' account and confirmation of receipt into the solicitor's account.
Are there any potential tax implications or legal considerations with receiving funds from my parents for the property purchase?
Receiving funds from your parents for a property purchase may have tax implications under local law. If the money is a gift exceeding the annual gift allowance, it could be subject to taxes if your parents pass away within a certain timeframe. Additionally, you might need to declare the gift to your mortgage lender.
Should there be any formal agreement or declaration between me and my parents regarding the money used for the deposit?
It is advisable to have a formal agreement or declaration with your parents regarding the deposit, as this clarifies the nature of the funds—whether it's a loan or a gift. This helps prevent disputes and ensures clarity for lenders.
If the funds are transferred directly from my parents to the vendor, how should this be documented to ensure everything is legally compliant?
If your parents transfer the funds directly to the vendor, it is essential to document this as a 'gift' to avoid future disputes regarding repayment. A formal letter from your parents stating the amount given and that it is a non-returnable gift should be secured. Additionally, ensure your solicitor is informed about the source of funds.
