How are loans from parents or other third parties are to be treated in a Family Law dispute?

A common issue arising in family law property matters are how loans from parents or other third parties are to be treated in a dispute. Was a party even aware a loan existed prior to the relationship? Is the loan disputed and was it always considered a gift until separation? Has the loan been properly documented or is there an informal agreement? What are the terms? How does the Court look at those terms?

If you weren’t aware of a loan when entering into a relationship, there are a number of ways this may be treated in your property settlement. It may be that the ‘loan’ was always intended to be a gift and never intended to be paid back, but will be sought to be ‘paid back’ to avoid those funds remaining in the asset pool and being part of a settlement.

There is also the possibility it may only make a small difference to the outcome. The Court may consider the monies advanced or gifted as a contribution to the asset pool by that party.

You may need to know:

1. Are there any contemporaneous loan document to support the existence of the loan? These can be obtained by disclosure.
2. If there are documents, what are the terms of the loan? Loan which have ‘no interest’ terms or no set payment arrangement or are available to the lender ‘at call’ may not be legitimate.
3. Have any repayment ever been made? Evidence of regular repayments rather than lump sum repayment when the relationship sours may be a consideration.

If you require assistance with determining a loan in family law proceeding, don’t hesitate to contact the Family Law and Property Law team at Culshaw Miller Lawyers for advice on 94881300 or info@culshawmiller.com.au.