Family Debts: What to Do When it Comes to Money & Family
- Feb 21, 2017
- 4 min read
By Angelo Bistolaridis, Senior Solicitor at Vizzone Ruggero Twigg Lawyers
Debts Within Families can cause all types of legal issues.
Many Family law matters nowadays (and more often than not in family law matters involving divorce of couples a part of a southern European or Levantine ethnic community) involve some mention of a family debt. That is, a debt owed by a couple or one member of that couple to a family member – usually a mother or father of one member of a couple.
Parents of young couples often ask us what to do in cases where their children have split and they are owed $100,000.00 or so from both their kids. The problems become compounded when there are no papers to show the loan.
Family debts are fraught with immense difficulty. Courts generally treat these debts with suspicion and even in circumstances where the debts are said to have been proved to exist on documentary evidence, courts are minded to consider those debts to be dubious or less than real.
Angelo Bistolaridis is Senior Lawyer practicing in Family Law and Commercial Litigation
At Vizzone Ruggero and Twigg we have dealt with many family law matters that include disputes over debts owed to family members.
Loans in General
A loan is a type of agreement whereby one person “A” pays money to another person “B” on condition that “B” will pay back the monies paid (with interest in most cases) after a specified period of time.
A mortgage is a type of loan advanced for the purchase of land and a mortgagee (the party that advances money) is provided security for the monies advanced by being granted an interest in land.
Problems with Loans
The biggest problem with these debts is the amount of evidence that exists to support the existence of the debts. We constantly see people waving pieces of undated scribblings on scrap paper and old Chinese restaurant menus with signatures and figures written on one side purporting to represent the advance of tens of thousands of dollars from a mum and dad to their almost married son.
Poor drafting can be a problem. In some cases we see people who have gone as far as to have loan documentation drafted up by a lawyer but which has critical flaws that make the loan agreement unenforceable – due dates for loans are sometimes left out the loan is sometimes undated, there is at times a nebulous understanding of how a debt may be enforced or what payments need to be made and when (and by who). In other cases people face the problem of being statute barred from enforcing a debt or a mortgage (See Vadisanis & Vadisanis & Anor [2014] FamCAFC 97).
Another hurdle that people face with these types of matters is the presumption of advancement and how that operates in the context of constructive trusts – that is to say, the weight of family law is against these types of loans. Often parents advance monies to the purchase of a child’s first home with his or her partner. It may be an understanding that these monies will eventually be paid back to the mother and father. In ordinary cases involving purchases of land where parties are not related, a person who has given money to a purchase but is not a registered owner of land is able to claim a constructive trust over property; that is, that these monies are held on a special trust for that advancing party and can be paid back with the assistance of the Supreme Court and courts of equity. In family law cases, the presumption of advancement rebuts these trust arguments. This presumption says that if money is advanced by family and a family member is not a registered owner of land and has no papers demonstrating the monies paid were for a loan or a mortgage or were to be paid back, then the monies should be presumed to have been paid to the family member as a gift (See Nelson & Nelson).
What to do?
There is no problem with trying to help your children when they go out and dive head first into the difficult world of marriage. In today’s Sydney, property is so expensive young couples need as much help as they can get when they move out of home and buy their first home. The problem is that young couples, like all couples, can break-up and do break-up.
We at VRT offer this advice:
If you are going to give your kids money give it as a loan. You can always forgive the loan in a will or in the future but make sure the money you have paid is money that has to be paid back to you unless you are happy to gift that money and give it away. Go to a lawyer, draft the loan (or the mortgage as the case may be) and pay duty on it, register it and lodge it on title.
Pay the money after the documents are drafted it up – your loan is no good to you if you have drafted it 20 years after the monies were paid to your kids.
Be sure you can afford to make these monies available to your kids – its no good needing your money back sooner than your kids can pay you. This adds drama and problems to the lives of your children as well as causes problems between you and your child.
Last but not least call us so we can give you the advice you need to ensure your prepared for the worst case now whilst you are enjoying the best case.
Angelo Bistolaridis is a senior lawyer at Vizzone Ruggero Twigg Lawyers practicing in family law and commercial law. Wish to discuss this article with him or how he can assist with your family law/debt issue? Email him or call 02 9264 7244
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