The first rung on the property ladder is higher off the ground than it used to be. Parents who are still active but have reached retirement increasingly want to use their savings to help adult children or grandchildren to buy a property. Their intentions are to use the funds now while it can really help the adult children or grandchildren, with many viewing the contribution as an ‘early inheritance’.
The payments can be large amounts of money and although given with the best intentions, parents may be putting their financial security at risk. Aged care can be very expensive and require resources for many years as expectancies continually rise.
Family relationships can suffer if everyone’s intentions are not crystal clear. While no one likes to believe it will happen in their family, too often we see the other side when misunderstandings occur, or relationships have broken down.
To protect the people involved against these risks, put the agreement in writing. Ensuring the terms are clear from the outset is much easier than trying to fix problems that might arise.
Important considerations when providing funds to family members include:
- Is it a gift or a loan? You should always get taxation and financial advice.
- If it’s a loan, when/how is it to be repaid? Will you charge interest?
- What happens if there is a relationship breakdown?
If you are considering providing money to a family member’s purchase or are the recipient of a parent’s contribution, we can assist you to ensure your interests are protected.
How can we help?
When dealing with loans between family members, it is important to aware of any risks involved. The Wills & Estates team at Snedden Hall & Gallop are happy to chat about your unique circumstances to ensure your interests are protected. Get in contact with them on 02 6285 8000 or by email.