What do lawyers hate most?
Well there might be a few nominations here but up at the top of the list will be loans made between family members.
They have the potential for disaster and the destruction of family ties.
So, if you are intending to loan money to a family member then do yourself a favour – get independent legal advice.
Usually loans of this type are given by caring and dutiful parents to a child or children or other family member in order to assist them.
Are the moneys actually loaned or are they a gift? What needs to be certain is that each party to the payment of moneys understands the terms of any payment/s to ensure that there is no potential for disagreement later.
In a recent District Court action, elderly parents alleged that they had paid to their son substantial sums of money (paid over a period of four years) and that each payment was in fact a loan and re-payable on demand.
The son contended that the moneys paid were in fact gifts.
The Court held that the parents did not prove that there was an intention to enter into legally enforceable loan agreements with the son and their claim was dismissed.
So, what does this mean for you? You might be trying to do the right thing by giving money but you need to protect yourself – get sound legal advice and if required an enforceable loan agreement.
One other issue which is often overlooked is the aspect of how any loan arrangement might impact on any social security entitlements.