The Bank of Mum and Dad

Lending money to your children to buy their first home can be a generous and life-changing move, but it’s essential to consider the legal implications before proceeding.

  • Family relationships need to be considered, for example whether you (the lender) are in a different relationship to your child’s other parent, the status of your child’s relationship with their own partner (if any), and to what extent you should consider the position of your other children.  Future scenarios should be thought through, for example how you might protect your loan funds from a relationship property claim against your child by their ex-partner.  Relationship property law can be complex, but is vitally important to think about.
  • Estate planning matters can also influence how you gift or loan money to your child. Factors to consider include the size of the loan or gift, how it may affect what you’d like to gift in your will when you die, how it may affect entitlements of other beneficiaries and whether there is a risk of a potential Family Protection Act claim against your estate in the future. 
  • Formalising the agreement is the best way to ensure that your interests are protected and you or your loved ones aren’t out of pocket or feeling aggrieved later on.  The form an agreement takes will depend on a number of factors such as whether it is a gift or loan, the source of funds (for example whether from you personally, a family trust or company), the terms and conditions of any loan  (such as repayment timeframes, interest if any, how to deal with missed payments).
  • Other considerations include tax, whether you should hold a registered interest on the title to the property, and whether you might share in any capital growth of the property. If you are asked to guarantee your child’s loan with the bank.  The bank is likely to require you to take independent legal advice, as you become legally responsible for repaying the loan if your child defaults on their repayments.

There’s no ‘one size fits all’ scenario.  Any lending arrangements with your child should be tailored to minimise the risks to both parties, as well as those of your wider family, and ultimately your estate once you are gone.  Call one of our property and estate planning team if you wish to discuss further. 

Related Articles
urban
Going for Housing Growth – Addressing our Housing Crisis

On 4 July 2024, the Coalition Government introduced its plan to fix our housing crisis consisting of five interlocking actions.

Read More
property inheritance
Receiving an inheritance during your relationship

Relationships can be complicated waters to navigate at the best of times, but it can become even trickier when thought needs to be given to relationship property matters.

Read More
bank mum dad
The Bank of Mum and Dad

Lending money to your children to buy their first home can be a generous and life-changing move, but it’s essential to consider the legal implications before proceeding.

Read More
3Farmersshakinghands2
Who really wants to be a trustee?

The Trust Act 2019 outlines the obligations of trustees, and when taking on a trusteeship an individual or company must be aware of the risks involved.

Read More
innovationagriculture energya tractor powered by livestock manure
Rural eSpeaking Summer 2022

Trusts and succession

Read More
istockphoto 1311594965 612x612
Commercial eSpeaking Summer 2023

Letter of Intent

Read More
greenwashing.jpeg 1
Fineprint Summer 2022

Greenwashing

Read More
couple arguing
Property eSpeaking Summer 2022

Negative equity on your property?

Read More
istockphoto 1193076990 612x612
Commercial eSpeaking Spring 2022

Contract Compliance

Read More
Employment Investigations

ITS EMPLOYMENT MONTH!

Read More
Off the Record Episode 5 Jayne cover 1000
Off the Record - How will the new housing density rules affect Queenstown?

https://www.youtube.com/watch?v=Ml7nmEmtvSY

Read More
old couple smiling at computer
Trust eSpeaking Spring 2022

Trusts Act 2019 also affects executors and administrators of wills

Read More
Whats the Difference Between a Debtor and a Creditor
Fineprint Winter 2022

Creditor compromise regime: Another option in insolvency Guest editorial: The economy - tougher times ahead? Love, heartbreak and...death? Make a new will and EPA's when you separate New Incorporated...

Read More
podcast remarkables3
Off the Record - How to Survive a Legal Dispute

https://www.youtube.com/watch?v=lZ6pC9agrrs

Read More
1 GQSB4LpNRROIcsXjq4Cbg
Commercial eSpeaking Winter 2022

2022 Budget

Read More
podcast remarkables2
Off the Record - Can your business handle divorce?

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode 3 of their podcast, Off the Record.

Read More
podcast remarkables
Off the Record - A New Era for Directors' Duties

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode two of their podcast, Off the Record.

Read More
etf investment guide theme wood
Rural eSpeaking Autumn 2022

He Waka Eke Noa

Read More
CAN AN OWNER OBTAIN SPECIFIC PERFORMANCE OF A BUILDING CONTRACT UPON A BUILDER’S REPUDIATION?

Duncan Anderson, Associate, Mactodd Lawyers, Queenstown

Read More
303364c14cbf1e1eb7769ee4321d23d5
Off the Record - Fair Pay Agreements

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have started a new video podcast where they address issues in law affecting Queenstown businesses.

Read More
0x0
Fineprint - Autumn 2022

Mental health in the workplace Co-ownership arrangements Checking your home is accurately insured Helping your family before you pass away Notifications of privacy breaches increase significantly Post script

Read More
2E064F28 C892 43AD 8F60 BC43E5BE2D68
Commercial eSpeaking Summer 2022

Contractors

Read More
happy couple
Fineprint - Summer 2021

- Defining a de facto relationship

Read More
ricardo gomez angel z6CcN8rlftY unsplash2
INTERNATIONAL CONSTRUCTION LAW JOURNAL ARTICLE

Mann v Paterson Constructions Pty Ltd—Builders' Quantum Meruits Revisited' (2021) 37 Construction Law Journal 207 discusses recent changes to the law in Australia regarding restitutionary claims able to be made...

Read More
Looking at house plans
Fineprint - Winter 2021

Buying off the plans New edition of To Trust or Not to Trust Climate Action Toolbox Post-Covid working world An independent trustee Postscript

Read More
download 1 jpeg
Rural eSpeaking Autumn 2021

Rural Leases - Should be more specific

Read More
download
Rural eSpeaking - Summer 2020

Investment in Farming - A focus on syndicated farm investments The finite supply of water - Water easements Over the Fence - Crown Pastoral Land Reform Bill (submissions open),...

Read More
remote working
Commercial eSpeaking - Spring 2020

Read More
carbon footprint
Fineprint - Winter 2020

Read More
Wellbeing Budget 2020 Image 1080x675
Commercial eSpeaking - Winter 2020

The government’s Budget, presented by the Minister of Finance the Hon Grant Robertson on 14 May has addressed, in the words of the Minister, “a 1-in-100 year health and economic...

Read More
UNDERSTANDING EMPLOYMENT LAW DURING COVID-19

Read More
checklist
Home Buying, Selling & Moving Checklist

These helpful checklists will guide you thought some of the most important areas you and your lawyer need to address when purchasing or selling a residential property and also when moving.

Read More
on the move logo2
On The Move - A Practical Guide For Buying & Selling Your Home

Also includes comprehensive checklists to you don't miss out any important step as well as details on how to protect your assets and when you also need to consider a...

Read More
handing over keys
Australian Guide To Buying Property In NZ

Not all investments in NZ require consent from the Overseas Investment Office (“OIO”) but like many countries NZ has controls on overseas investment. Certain land is subject to OIO consent.

Read More
family trusts4
Family Trust Guide

This practical guide designed to steer you through the essentials of Family Trusts including: Is a family trust for you? Protection given by a Family Trust. Planning for your life. Duties of trustees and how to run a trust. Costs.

Read More
road to glenorchy small2
Guide To Buying Real Estate In New Zealand

Our local knowledge, experience and expertise will provide you with the support and advice you need for a successful property purchase, regardless of the size or complexity of the transaction.

Read More
chinese buyers
Chinese Buyers Guide To Buying Property in NZ

We have produced a practical guide on buying a home or an investment property in New Zealand in Mandarin.

Read More
wills estates2
Estates Booklet - The Closing Chapter

You’re catapulted into thinking about organising a funeral, whether it will be a cremation or burial and how to organise the day, and then you also need to think about...

Read More
Be the First to Know
Something for Nothing

Stay up to date with our latest News, Views & Resources by subscribing to our newsletter. We promise to provide you with quality content & the latest industry news.