THERE have always been loans and gifts between family members, often between a parent and a child or children.
These payments are rarely documented and the intention of each party is often not clear. This can lead to significant family concern and dispute, both before a person dies and with their Will.
For example, a parent may think of it as a loan and the child, a gift. It is important that whatever the payment is it should be documented and clear and understood by both parties.
If it is a loan, what are the terms of repayment and is there any interest and in what circumstances? Is the loan forgiven on death or is it to be paid from that child’s share of the parent’s estate? Are there enough assets or the correct type of assets to allow the loan to be offset?
These gifts and loans have always been common family arrangements but they are becoming more important because the amounts involved are greater and there is a higher tendency for family members to dispute Wills.
The law in relation to loans and gifts is complicated and it will sometimes be assumed that a payment from a parent to a child is a gift unless there is some evidence to the contrary. If it is a loan or a gift, what happens with other children or family members? Are there similar loans or gifts to them? Is there any adjustment in the Will?
It is important that whatever the payment is, it is correctly documented and signed by both parties to include any terms of payment or interest. The Will of the person paying the money should also be updated to make it clear if any such loan is forgiven on death or is it to be offset against that child’s share of the estate and against what assets.
A level of family disputes and distress can be greatly reduced by these simple measures.
Until next week – Keep it Legal!
*The legal information in this article is of a general nature only and not intended to be legal advice to rely upon