Planning on Giving Money to your Kids?

If you give money to your kids, it won’t automatically come back to you if any of those things happen.

  • on their separation or divorce, it would be an asset of their relationship and be available for distribution between your son or daughter and their partner under the Family Law Act or the Property (Relationships) Act.
  • on death, those funds will flow to their beneficiaries as stated in their Will (or if they don’t have a Will, in accordance with the laws of intestacy).
  • on bankruptcy, their trustee in bankruptcy will be able to use those funds to pay themselves and any creditors.

In order to protect against these types of events, the advance needs to be documented as a loan. In the absence of such a document, the “presumption of advancement” applies because of the relationship of parent and child and it will be considered a gift.

Ideally, in addition to a Loan Agreement, some form of security for the loan could be provided, such as a Mortgage or Caveat over land or a Security Interest registered on the Personal Property Securities Register.

Source

Reproduced with permission of McKillop Legal (02) 9521 2455

Important

This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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