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    • Declaration of Trust (before you buy) - $99
    • Div 7A Loan Agreement - $65
    • Div 7A Loan Agreement for UPE - $55
    • Family Trust - $165
    • Family Trust - Streaming & Bamford Update - $165
    • Family Trust - Update to Allow Change of Appointor and Guardian - $165
    • Family Trust - Update to allow Sole Trustee - $55
    • Family Trust - Update to Exclude Foreign Persons (NSW) - $198
    • Family Trust - Vesting - $259
    • Forgiveness of Debt - $121
    • Opening Minutes for the Unit Trust - $33
    • Partnership Deed - $220
    • Release of Unpaid Trust Entitlement - $121
    • The new small business restructure roll-over rules in practice (White Paper) - $55
    • Trust Distribution Minutes Library for 2008/09 - $99
    • Trust Distribution Minutes Library for 2009/10 - $99
    • Trust Distribution Minutes Library for 2010/11 - $99
    • Trust Distribution Minutes Library for 2011/12 - $99
    • Trust Distribution Minutes Library for 2012/13 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2012/13 - Single-Use - $110
    • Trust Distribution Minutes Library for 2013/14 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2013/14 - Single-Use - $110
    • Trust Distribution Minutes Library for 2014/15 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2014/15 - Single-Use - $110
    • Trust Distribution Minutes Library for 2015/16 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2015/16 - Single-Use - $110
    • Trust Distribution Minutes Library for 2016/17 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2016/17 - Single-Use - $110
    • Trust Distribution Minutes Library for 2017/18 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2017/18 - Single-Use - $110
    • Trust Distribution Minutes Library for 2018/19 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2018/19 - Single-Use - $110
    • Trust Distribution Minutes Library for 2019/20 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2019/20 - Single-Use - $121
    • Trust Distribution Minutes Library for 2020/21 - Multi-Use - $350
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    • Unit Trust - $149
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    • Forgiveness of Debt - $121
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    • Director‘s Indemnity Agreement - Compulsory Insurance - $197
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  • All documents

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    • Acknowledgement of Trust (already own asset) - $165
    • Adopt Committee Recommendations kit - $33
    • Advanced Legal Health Check for Businesses - $18
    • Appoint a Committee kit - $33
    • Appoint an Alternate Director kit - $33
    • Appoint Managing Director & Confer Powers kit - $33
    • Buy a House with Friends Agreement - $110
    • Buy Sell Agreement Company - $197
    • Change Appointor and/or Guardian of Family Trust - $110
    • Change of Name of Family Trust - $88
    • Change Registered Office kit - $33
    • Change Trustee of Family Trust - $110
    • Codicil to change the Executor - $99
    • Commercial Lease - $250
    • Company (ELodgement) - $631
    • Company Constitution Update - $99
    • Confidentiality Agreement (Non Disclosure) - $99
    • Co-Owners Agreement - $110
    • Dealing with Forgiven Debts (White Paper) - $55
    • Debt Recognition (including pre-Div 7A Loans) - $33
    • Debt Recovery Kit - Qld - $44
    • Declaration of Trust (before you buy) - $99
    • Demand and Statement of Claim for Debt - NSW - $88
    • Demand and Summons for Debt - VIC - $88
    • Demand and Summons for Debt - WA - $88
    • Derivative Risk Statement for SMSF - $65
    • Director‘s Indemnity Agreement - Compulsory Insurance - $197
    • Director‘s Indemnity Agreement - No Insurance - $197
    • Directors Conflict of Interest Kit - $44
    • Disclaimer - Email - $55
    • Div 7A Loan Agreement - $65
    • Div 7A Loan Agreement for UPE - $55
    • Employment - Conduct Issues Letter - $33
    • Employment - Employee Expenses Policy - $55
    • Employment - Performance Issues Letter - $33
    • Employment - Request for Medical Information - $33
    • Employment - Termination Letter - $33
    • Employment - Transferring Employee Letter - $33
    • Employment Contract - $99
    • Enduring Power of Attorney - NSW - $55
    • Enduring Power of Attorney - SA - $55
    • Enduring Power of Attorney - WA - $55
    • Enduring Power of Attorney (Financial, Personal/Health) - QLD - $55
    • Enduring Power of Guardianship - NSW - $55
    • Enduring Power of Guardianship - WA - $55
    • Family Trust - $165
    • Family Trust - Streaming & Bamford Update - $165
    • Family Trust - Update to Allow Change of Appointor and Guardian - $165
    • Family Trust - Update to allow Sole Trustee - $55
    • Family Trust - Update to Exclude Foreign Persons (NSW) - $198
    • Family Trust - Vesting - $259
    • Forgiveness of Debt - $121
    • Independent Contractors Agreement - $99
    • Investment Strategy for Self Managed Super 15/16 - $65
    • Investment Strategy for Self Managed Super 16/17 - $65
    • Investment Strategy for Self Managed Super 17/18 - $65
    • Investment Strategy for Self Managed Super 18/19 - $65
    • Investment Strategy for Self Managed Super 19/20 - $65
    • Investment Strategy for Self Managed Super 20/21 - $65
    • Loan Agreement (No Security) - $110
    • Minutes for Members to Inspect Books - $33
    • Minutes for Resigning Director - $33
    • Opening Minutes for the Unit Trust - $33
    • Partnership Deed - $220
    • Pension Pack for Self Managed Super - $299
    • Power Of Attorney By Company - $99
    • Product Disclosure Statement (general) - $66
    • Product Disclosure Statement (Pension only) - $99
    • Release of Unpaid Trust Entitlement - $121
    • Remove a Managing Director kit - $33
    • Remove and Replace a Director kit - $44
    • Replace Company Secretary kit - $44
    • Self Managed Superannuation Fund Deed - $149
    • SMSF - Minute to Appoint Administrator - $33
    • SMSF - Minute to Appoint an Auditor - $33
    • SMSF - Minute to Approve Financial Statements - $33
    • SMSF - Minute to Approve Financial Statements 07/08 - $33
    • SMSF - Minute to Approve Financial Statements 08/09 - $33
    • SMSF - Minute to Approve Financial Statements 09/10 - $33
    • SMSF - Minute to Insure The Members - $33
    • SMSF - Update Rules - $165
    • SMSF Limited Recourse Borrowing Arrangement - $220
    • SMSF Restricted Commercial Property Assessment - $695
    • SMSF Restricted Residential Property Assessment - $315
    • SMSF Subscription - $99
    • Statutory Declaration - $0
    • Terms of Trade (Non ROT) - $132
    • The new small business restructure roll-over rules in practice (White Paper) - $55
    • Transfer of Shares Kit - $0
    • Trust Distribution Minutes Library for 2008/09 - $99
    • Trust Distribution Minutes Library for 2009/10 - $99
    • Trust Distribution Minutes Library for 2010/11 - $99
    • Trust Distribution Minutes Library for 2011/12 - $99
    • Trust Distribution Minutes Library for 2012/13 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2012/13 - Single-Use - $110
    • Trust Distribution Minutes Library for 2013/14 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2013/14 - Single-Use - $110
    • Trust Distribution Minutes Library for 2014/15 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2014/15 - Single-Use - $110
    • Trust Distribution Minutes Library for 2015/16 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2015/16 - Single-Use - $110
    • Trust Distribution Minutes Library for 2016/17 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2016/17 - Single-Use - $110
    • Trust Distribution Minutes Library for 2017/18 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2017/18 - Single-Use - $110
    • Trust Distribution Minutes Library for 2018/19 - Multi-Use - $350
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    • Trust Distribution Minutes Library for 2019/20 - Multi-Use - $350
    • Trust Distribution Minutes Library for 2019/20 - Single-Use - $121
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    • Trust Distribution Minutes Library for 2020/21 - Single-Use - $121
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    • Unit Trust - Add New Member Kit - $110
    • Webinar On Demand - Fixing Family Trust Deeds - Mistakes made pre and post establishing a Trust - $99
    • Webinar On Demand - How to assist clients with their debt issues - $99
    • Webinar On Demand - Introduction to Family Trusts - the basics - $99
    • Webinar On Demand - Lawyers and Accountants Duties as Executors - $99
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Print Version Back

Hey Dad, best buddy, can I borrow some money?

Issue: 415 - Monday, 2 July 2012

In this Issue

  1. Hey Dad, best buddy, can I borrow some money?

1. Hey Dad, best buddy, can I borrow some money?

Question: 
My son and his pregnant girlfriend recently married.  A couple of days ago they called in – this is pretty unusual so I thought something might be up.  The reason for their visit soon became obvious.  They had just seen a house they wanted to buy but can’t because they don’t have enough money saved for a deposit.  They then asked me if I could loan them enough for the deposit.  I want to help but don’t want them to conveniently forget about repaying any money I lend them.  Is there any way I can show them how serious I am about having the loan repaid?

Answer:
It’s natural for parents to want to help their children as much as they can.  This is especially so since the property market is so hard to break into.  Also, the small matter of having a baby on the way can’t be overlooked!  This will definitely add to the desire to help make your son and his new wife’s transition to family life a bit easier.

The good news is that there is a way to help out and protect your interests at the same time.  A written loan agreement can do this.  By providing all of the terms and conditions that you have agreed in writing, it will give all parties certainty about what has been agreed and what is expected from everyone.  It helps prevent disagreements which could result in your relationship with them breaking down.

Your son and daughter-in-law might not be expecting a written loan agreement.  They might even view it as a sign you don’t trust them to re-pay the loan. However, formalising the agreement can be a good thing for them. It shows the family that they are serious about repaying the money and are not just asking for a handout. This can be particularly significant in preventing sibling jealousy. People who have been given a leg-up by their parents in the past have been thankful that their loans were formalised.  It serves as a good life lesson of what it means to be independent of Mum and Dad, and it does not leave any grey areas for disagreements and doubt to seep in.

A family loan agreement will also protect your rights should your son and his new wife split up.  I know it’s not a pleasant thought, but you need to protect yourself in case this happens.  If the agreement is not written down, the equity in their house (including the money you loaned them) forms part of the joint assets to be split between them.  This means that your ex-daughter-in-law benefits from your ‘gift’ and has no obligation to pay back the money.  You might lose all or half of the money you loaned.

When making your decision, you also need to think about your other children if you have any.  Will you be able to offer your other kids financial help to the same extent as you are considering giving to this son and his wife?  In this respect the loan will need to be either on commercial terms or on terms that you can extend to all of your kids should they approach you in the future.  This could be a source of family tension if one child thinks the other is receiving favoured treatment.  We all know that this can result in a slippery slide towards family hostilities and open warfare between family members. 

OK, what should I do next?

If you do decide to give the loan, you will need to think about whether you want it to be on commercial terms or not.  After all, you could have done other things with that money, including earning a decent return on it (if that’s possible in this market!). 

You are free to agree on the loan being repaid with any amount of interest – this includes nil interest.  If you do decide to charge some interest you will need to agree whether it is fixed or variable or even pegged to a commercial bank’s home loan interest rates.  You could also make the loan repayment period open-ended or nominate a time by which it needs to be repaid.

If you are really intent on making the loan on commercial terms you could consider charging a higher rate of interest if they default on a payment.  This would demonstrate how serious you are about the loan being paid back.  It might not be good for family relations when you raise it, but it would certainly send a message!

You may also wish to think about whether you want any security for the loan.  Whilst this agreement is classed as a personal debt, it is still possible to ask for security over it.  Platinum members can find out about more about this.

Platinum Members, click here to view content

LawCentral has developed a loan agreement which covers all aspects that you need to think about when entering into a family loan agreement.

Build this agreement now:

  • Loan Agreement

From the Bulletin Bookshelf:

  • Issue 414:  Time is ticking:  Make a minute or lose a pile
  • Issue 413:  A win for common-sense
  • Issue 412: SMSFs beware:  it’s only partly your money
  • Issue 411:  Protect your company from your employees
  • Issue 410:  The risky business of employment contracts
  • Issue 409:  Who do you trust?  Choose your Enduring Power of Attorney while you still can

Keywords:

House, deposit, property market, loan agreement, family loan agreement, written agreement, financial, commercial terms, security, caveat, property, interest, fixed, variable, home loan, registered, land titles office, mortgage, debenture, personal property, enforceable right, sell, borrower,


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