A sudden death can cause extra heartache when money is involved. Imogen Tew hears both sides of a family’s story
January 29 2022, The Sunday Times
The partner’s story
Things did not go to plan on Alex and Nic’s first date.
Alex Delaney, a 24-year-old who worked for a charity in London, had agreed to meet Nic Infante, a 29-year-old software developer, in Greenwich. But on that day in 2008 the London Underground was down, so they ended up meeting in the concrete carbuncle that is Canada Water bus station in east London. It didn’t matter — they hit it off instantly.
A year later Alex and Nic moved in together. They bought their first home, a two-bedroom flat in Hackney in 2011 thanks to money from Nic’s father, Neri.
In 2013 Alex and Nic tied the knot at a ceremony in London. They dearly wanted children and in 2017 Alex started IVF treatment. It was a happy marriage, and life was good.
On January 7, 2018, they had just returned home from visiting Neri, who lives in Brazil, when Nic suddenly became breathless. Alex called an ambulance and Nic was taken to hospital. Within 45 minutes he had died from a pulmonary embolism.
“I spent 18 months in complete shock, my whole world collapsed,” said Alex. “I used to worry about him being hit by a lorry when cycling or whatever, but you just don’t worry about things like this happening when someone’s only 39.”
When Alex began the arduous process of sorting out Nic’s affairs, informing the banks of his death and pausing the mortgage payments, her life started unravelling further. Her dad, who was helping with the admin, found a private loan agreement between Nic and Neri for the money used to buy the flat. It said that the £250,000 would need to be repaid in the event of Nic’s death or divorce.
“My dad turned and said, ‘Did you realise this was going to have to be paid back?’ I was completely shocked, I had no idea the money was a loan,” Alex said.
“As the mortgage was in Nic’s name, and I couldn’t afford to get the same mortgage with my salary, I wasn’t able to afford a property without that money.”
During a family meeting to discuss funeral arrangements, Nic’s father said that, as per the terms of the loan, he expected the money to be returned.
“I sent my dad in as a negotiator because I couldn’t cope with it. My dad told Neri that if he followed through with it he would probably ruin his relationship with me, and Neri agreed to knock down the loan by a fifth,” Alex said.
“By this time, I just wanted to be separate from it all. Everyone was in shock, but that’s not how you have that conversation.”
Alex moved out of the flat about a year after Nic’s death, paying off the mortgage and returning the money to Neri. With a death-in-service benefit from Nic’s work and help from her family, she was able to buy a similar flat near by.
She now runs Lemons.Life, a will-writing business for women, trying to ensure that others have the conversations she and Nic never did. “I had a very happy marriage, but I was incredibly naive,” Alex, now 37, said. “It’s hard to have these conversations, but people have to bite the bullet. You don’t want these shocks in the worst possible moment of your life.”
The father’s story
When Neri’s only son, Nic, needed help to buy his first home, Neri was more than happy to oblige.
Nic had been with his girlfriend, Alex, for three years. They had been living together for two years, and while Neri was delighted Nic had fallen in love with Alex and welcomed her to the family, it was still a relatively short time in his eyes.
Neri, 83, who lives in Brazil, wanted to help Nic with money and had discussed how to structure this during regular visits to the UK. He decided that a loan was the right way to go about it.
“The financing of the flat Nic wanted to buy was set up as an interest-free loan because it was cheaper than a mortgage, it was tax-efficient, and it protected my son’s interests if he should split up, divorce or die,” said Neri. “Nic and Alex weren’t married at the time, but even if he had separated or divorced, the amount I lent him would not be divided with his partner.”
The loan agreement was drawn up by Neri’s solicitor and he and Nic discussed the details over Skype. It was not until Nic died that Neri found out that Alex did not know about the loan.
“It was a loan I had hoped would never be repaid. I wasn’t aware that Nic hadn’t told Alex, but that was his choice,” said Neri. “I never understood why Alex was disappointed when I requested the return of most of the loan [£200,000], instead of being grateful for my donation of the balance. Couples split up so frequently and easily in today’s world. Alex has now remarried, so I feel justified.”
He added: “Nic was my only son, so he was going to inherit most of my assets. Had he needed more, I would have happily given him, or ‘lent’ him, what could be envisaged as inheritance.”
Neri, who is Italian, said he had always hoped Nic and Alex would have a long and happy life together and had thrown them a “lovely” wedding party at his family’s villa in Tuscany.
The problem
Family wealth is increasingly being used to help young people on to the property ladder. The property website Zoopla says that two thirds of parents have helped their child to buy a home, with the average contribution hitting £32,440.
Many see this as their child’s inheritance being handed down early, when they need it the most, and emotions can run high if the money is later disputed when the couple divorce, or one dies. This can leave partners potentially on the hook for thousands of pounds at an already stressful time. In most cases, the bank will want assurances that any money gifted to a child is in fact a gift, rather than a loan. Families may have to sign a “gift form” to relinquish any claim they have on the property. This can complicate matters in the case of divorce or death because the family will have no right to claim that money back.
Tim Snaith, a partner at the law firm Winckworth Sherwood, said: “Whenever you look to buy a property with someone (whether as an investment, as friends, as a couple or a married couple), you should always consider what would happen if one of them died. If there is gifted or loaned money from either family, this should be taken into account.” In Alex and Nic’s scenario, Alex would be unlikely to have any legal claim to the money because Neri and Nic had drawn up a loan agreement.
If there is no such agreement in place and no instructions in a person’s will, what happens to the property on death depends on whether the couple are married and how the property is owned.
If the property is solely in one person’s name, the couple are married and there is no will, the property would automatically pass to the surviving spouse under intestacy rules (which come into play if there is no will). All personal property, belongings and the first £270,000 of the estate passes to the deceased’s spouse. The spouse also gets half the remaining estate, with the other half split between any children or grandchildren.
If they are not married, the property would pass to any surviving parents if there was no will to say otherwise.
If the property is jointly owned, what happens depends on whether the property is owned as tenants in common or joint tenants. For tenants in common, each person owns a set share of the property, and what happens to their share is according to their will or the intestacy rules in the absence of a will.
If the couple owned a property as joint tenants, they own the whole property together, so if one dies, the other becomes the sole owner, regardless of any wills or intestacy rules.
“We are urging clients all the time to talk about this,” said Zahra Pabani, family law partner at the law firm Irwin Mitchell. She said that parents wanting to protect their wealth “down the bloodline” needed to be clear. If the money is given as a gift, by law it stays a gift, regardless of divorce or death.
Parents could ask that the couple sign a postnuptial agreement, if they are married, or a prenuptial agreement if they are due to be, which lays out what happens to the parents’ gift if the couple divorce. You could also ask your child to make sure their will reflects your wishes for the money if they died.
Snaith said: “If you feel strongly that this is family money, you should warn your child and their partner about the terms of the gift and get them to write a will. People never think that people are going to die or divorce, but we’re always saying ‘please do it, please sort it’, because we know it does happen.”
The couples using the gifted or loaned money could also protect themselves and their partners by taking out life insurance to cover the amount that the parents contributed. This can relieve the pressure on the spouse and make sure everyone feels they have been treated fairly.