Family loans – should they be documented?
In a 2013 decision by the Family Court, the Court decided that a loan from mother to her son of nearly $2M for the purchase and renovation of a property ‘will ever require repayment’.
The effect of that decision was that the $2M was not considered part of the asset pool to be divided between the then separating parents.
Some of the factors that influenced this decision were that the son had always been reliant on his family for financial support and that he had a good and trusting relationship with his mother; the mother’s wealth was worth in excess of $20M; the mother knew her son couldn’t pay her back; and the timing of the loan – 9 days after the trial with settlement 15 days after the trial of the matter.
If you are lending money to your family members and expect to be repaid (not gifted), then it is imperative that the loan is documented and if possible, even secured.
If you would like to know more, please contact one of our friendly staff at Bambrick Legal today:
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