Family Money- Can I Protect It?

gift-letter Bank of Mum and Dad

In today’s economy, it is has become increasingly common for parents to financially help their children, especially when it comes to buying their first home.

Parents may loan the money, gift the money, or act as guarantor. While most parents want to help their children as much as possible, this can raise a variety of issues.

When separation occurs between de-facto or married couples, family money or inheritance will often be disputed. The Court will need to consider when the financial contribution from the family was made. Was it before the commencement of the relationship, during the relationship, or post-separation?

The Court will also need to consider whether the money was a gift, or whether the money was a loan and needs to be paid back. Proving money is a loan can sometimes be difficult, especially when the loan is from parents.

Being a guarantor is also risky. If the children default on their payments, the parents are the ones who will suffer the consequences. This can be even more complicated if the children are joint tenants with their spouses, and they are going through financial proceedings in the Family Court.

Before financially assisting their children, parents will need to consider how they are going to protect the family money, and in some cases, the family legacy. This protection may not always just be against the children’s partners, but it may also include the children themselves.

There are ways to protect family money. For example, this can be done through a binding financial agreement or a Will. Parents will also need to seriously consider whether the children have ever shown the ability to save and pay off a loan, before acting as a guarantor.

One of our Family or Business and Estate Planning Lawyers can assist you further if you are a parent who has already provided or is going to provide an inheritance to a child, or if you are a child who has, or will receive an inheritance.

 

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Friday, 18 October 2019