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  • With the increasing cost of living, adult children are increasingly turning to the bank of mum and dad for financial support.
  • While parents will generally not admit it is conceivable that there could be a family breakdown, it is important to give legal advice that protects the parties if a breakdown does occur.
  • To avoid future litigation, the best protection is proper documentation, independent legal advice for all parties and security if the real intention is that the money is a loan.

Advising and preparing documentation for family loans, or other finance support by parents to adult children, is a common transactional aspect of many lawyers’ work – but it is important to know your client’s intentions first. Is it a loan or is it a gift? Do not be fooled by their instructions if there are any indications of an ulterior motive or unspoken agenda.

To avoid future litigation, particularly after relationship breakdowns, the key is to document agreements clearly, ensure both parties have independent legal advice before signing the documents, keep excellent file notes (scanned to a cloud system and never destroyed) and, if a loan is established, secure it with a mortgage.

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