PARENTS in Worcestershire are being warned over giving their children loans from “the bank of mum and dad”.

The warning, from mfg Solicitors’ Richard Connolly, says parents need to ensure cash gifts and loans are secured in case relationships break down.

Connolly, who is a partner at the firm, said unsecured cash gifts and loans from parents to children are at risk if relationships between the child and their partner break down.

Mr Connolly said the funds can be subject to claims and lost altogether in costly court battles if they are not protected prior to being handed over.

He said: “With house prices significantly higher than they were a generation ago, more and more parents are helping their children out with the cost of buying, either through a loan or a gift.

“What too many parents do not realise is that even though that money went to their child, that child’s partner could have a claim to it.

“It’s a grey area that too many are missing and it means parents have to make sure they put in place security to protect that cash investment. There are various ways of doing so, such as trust deeds, legal charges and official loan agreements.”

He added that it was important for parents to take legal advice early on, before their child has chosen a property to buy, so that everyone involved knows how the money is being given and that it is protected.

READ MORE: Couples warned their assets could be in danger without power of attorney

Mr Connolly said there were also complications involving mortgage lenders, who needed to be aware of the cash investment as it may affect the mortgage.

He added: “When you’re helping your child start out, perhaps even settle down with a partner they’re intending to spend their life with, the last thing you want to think about is the relationship ending.

“Unfortunately, it is essential to prepare for this eventuality so that the funds stay in the family.

“With proper advice it can be handled very swiftly, without awkward conversations and everyone can concentrate on planning for the future.”

mfg Solicitors has branches in Worcester, Kidderminster and Bromsgrove. Based in Worcestershire, Shropshire and Birmingham, mfg Solicitors provide a portfolio of commercial, agricultural and private client services.

Earlier this month, mfg's Peter Stephens warned couples they should investigate power of attorney to prevent their assets being seized in the event one of the couple suffers from dementia or otherwise loses their mental capacity.

Mr Stephens warned couples they faced delays of many months and a costly legal process of applying to the Court of Protection to become a ‘deputy’ unless they had lasting power of attorney.