What Happens If Our Parents Lent Us Money To Purchase Our Property? – Podcast Episode 50

Welcome to the podcast! In today’s episode, Director Caralee Fontenele will delve into a topic that many individuals face: the scenario of parents lending funds to a couple for property purchases. The question on everyone’s mind is: Do the parents get paid back?

Did you know that according to the Australian Financial Review, “Mum and dad are the ninth-largest lenders of loans in Australia!” This statistic highlights the significant role parents play in providing financial support to their adult children.

Exploring the Financial Matters in Family Court:

When it comes to determining financial matters between married parties, the Family Court holds a wide range of powers. One critical aspect that is explored is the distinction between loans and gifts. The answer to the question of repayment can vary, depending on the consequences associated with these loans or gifts and how they are treated in the Property Settlement.

Gifted Funds vs. Loaned Funds:

If parents of adult children wish to gift money, that is entirely acceptable. However, it’s important to understand that the gift is intended for the couple as a whole, rather than an individual child.

On the other hand, if parents want to loan money to the couple, there are steps they can take to protect their loan in the event of a relationship breakdown. These steps may include:

  1. Drafting a Loan Agreement: By drafting a loan agreement, both parties can establish clear terms and conditions, providing clarity and legal protection.
  1. Drafting a Binding Financial Agreement (BFA): A Binding Financial Agreement is a legally binding document that outlines how assets, debts, and financial resources will be divided in the event of a separation or divorce. Including provisions regarding the loan in the BFA ensures its protection.

Ensuring Loan Repayment:

Without the aforementioned documents in place, ensuring loan repayment can be challenging. However, maintaining an email trail, documenting monthly payments, or any other form of proof that demonstrates the loan’s nature will significantly assist in securing its return.

To gain further insights on this topic, we invite you to listen to the full podcast episode!

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