Since very early days, family members have often asked for, or offered inter-family private loans to assist with personal financial dilemmas. In present times with the ever rising cost of living/housing and other nasty events such as unexpected loss of employment or divorce/relationship breakdown, inter-family loans are consequently becoming far more common. Because the loans are between family members and, usually, everyone trusts each other, preparation of formal legal documentation and/or seeking legal advice is often considered unnecessary. For those who don’t seek legal advice, here are three things you really should know:
- If there isn’t proof/documentation to confirm it is a “loan” at the time the money was advanced, the law in some cases will assume the money was advanced as a “gift”.
- If there is an Enduring Power of Attorney given/received between the Lender and the Borrower, the law assumes the loan was obtained by “undue influence” and this must therefore be rebutted; and
- If it is a loan repayable upon demand, then after six (6) years, the arrangement becomes unenforceable unless it is refreshed.Beyond the above items, there are many other issues that can also potentially arise. Usually, all of this can be covered off with legal advice from a Lawyer appropriately qualified in the field and usually at not very much expense. In circumstances where the loans are for large amounts of money, it is very much recommended that legal advice should be obtained.
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.