Family loans
Property prices are soaring, and for many people it is impossible to buy their own home without the help of family.
The law states as a general rule money given to family or friends is seen as a gift, and is therefore not repayable. This is the opposite to a business situation, where the assumption is that any money given is repayable.
Any assumption changes if there is any written agreement or acknowledgement which reverses this assumption.
in a family situation, one party may think it needs to be repaid but the other may see it as a gift.
Money given to children is often a difficult situation, which can result in court proceedings, often in family law situations, when a parent will be forced to claim their loan back before the assets are split. Your child’s partner of spouse may not know about any loan or deny its existence.
If you are considering providing some financial help, some useful tips are:
Put any agreement in writing, signed and dated. it does not need to be drafted by a lawyer, and can say that any amount is only repayable when demanded.
if you want it repaid, agree on an instalment arrangement that is reasonable.
if a property is purchased consider going on title or at least registering a mortgage or caveat to record your loan.
Consider the effect of the money advanced, and does it need to addressed in your will.
Consider if you want to update your will in the circumstances.
get some legal advice on your options.
if you see the money as a gift, then tell your child or friend to avoid any confusion.
if you are asked to guarantee a loan or mortgage, get legal advice on what this means and that are willing to do this.
Remember if nothing is recorded, you will need to rely on the court agreeing that the money was a loan. it will look at what each side says, and payments made etc.
Remember to get accountancy advice on whether any gift effects your pension, tax or other relevant financial aspects of your situation.
Put any loan in writing before it is given. There is no guarantee that It will be signed after it is paid.
These tips are just some general comments on giving help to a friend or family. Contact Culleton Lawyers to get more specific advice relevant to your circumstances.