Lending To Your Children.
Parents and other benefactors to younger adults will know that providing for them is an ongoing labour of love. In today’s economy, helping out often extends to providing support for anything from tuition to help with buying property.
But what happens when the help given, is done in the best interest of the young adult, who doesn’t always see it in that way, and turns to the legal system to get what they feel they need? In this post, we’ll take a look at exactly this problem in terms of property investment.
The event
A father loaned $1.2 million to his son and the son’s wife, with the intention to assist the couple in purchasing a family home. Initially, the father intended to give the money as a gift to his son but later changed his mind after contracts were exchanged, but before settlement.
Instead, the money was advanced as a loan to his son, and to protect the advance, the father took out a mortgage over the property, with his son to pay the bulk of the repayments.
The resolution
Unfortunately, the couple’s relationship broke down, and during the lengthy family court and supreme court proceedings, it was found that due to the legal nature of the mortgage as a loan, it was not unjust, and kept outside the jurisdiction of the family court proceedings.
This means that, as a parent or benefactor, the court ruling from these matters should provide some comfort when you want to lend your children money in this way, that you can ensure its safety.
This comes from the precedent that this ruling provides. In short, the ruling decrees that as long as the terms of the loan are not onerous, and as long as the borrower(s) of the loan have received the appropriate advice regarding the loan’s terms and the nature of the transaction they undertake, it cannot be seen as a method of financial advice to avoid the jurisdiction of the Family Law Act of 1975.
The need to help our children and those under our care is not something that goes away, and if you want to ensure that your financial aid to your children remains safe, contact us for specialist property investment and acquisition advice.
