Putting Assets in Your Children's Names Can Be Risky

Transferring title of your assets to your children may have advantages but is not without risks, as one businessman found out when his son's bankruptcy left the family's substantial buy-to-let property portfolio exposed to his offspring's creditors.

The son's name appeared on the title deeds of 16 properties for which his father had largely paid. When the son was declared bankrupt, his creditors focused on the portfolio as a potential means of recovering what they were owed.

The father argued that the properties only 'nominally' belonged to his son and that he himself was their beneficial owner. However, a judge found that a purported declaration of trust had been post-dated and that both father and son had given unreliable evidence in an attempt to protect what they viewed as family assets.

Challenging that decision before the Court of Appeal, the father sought to rely upon fresh evidence and argued that the judge had ignored important documents which supported his case. In particular, he pointed to his will, in which he sought to divide the properties between his five children on the basis that they were his to bequeath.

However, in refusing permission to appeal, the Court noted that, prior to the son's bankruptcy, both he and his father had presented to the world – including mortgage lenders and the tax authorities – that the son owned the properties, both legally and beneficially. The father's appeal had no reasonable prospect of success.

The ruling meant that the portfolio formed part of the son's property in bankruptcy and was available to his creditors.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.