Should Parents Loan Money to Children in Relationships? Why Legal Advice and a Proper Loan Agreement Matter
As the Australian property market continues to challenge young buyers, many parents are stepping in to help their adult children secure their first home. Whether it’s a contribution to a house deposit or a lump sum to purchase a property, this support is often given as a "loan" from parent to child.
However, when adult children are in a relationship—whether de facto, engaged, or married—things can get legally complex. Without formal documentation or legal structure, a well-meaning parental loan can quickly lead to costly disputes, particularly if the relationship breaks down or the property is sold.
At Craigieburn Lawyers, we regularly assist local families navigating the financial and legal challenges of helping children in relationships. In this blog, we explore:
The legal risks of informal loans from parents to children in relationships
The importance of legal advice from a family lawyer
Why a properly drafted loan agreement or structure is essential
The “Bank of Mum and Dad” – A Growing Trend with Hidden Risks
With soaring property prices, many first-time homebuyers rely on financial assistance from their parents to enter the market. This assistance might include:
A cash contribution toward a deposit
Ongoing payments to reduce mortgage stress
A private loan to help purchase or renovate a property
While generous, these family loans often lack formal documentation, exposing both parents and their children to legal risk.
When Informal Agreements Go Wrong
One of the issues we see as family lawyers in Craigieburn is the absence of any legal agreement. Many parents believe that because “we’re family” or “it’s just between us,” everything will work out. Unfortunately, this isn’t always the case.
If your child’s relationship ends—particularly in a de facto or married situation—their partner may have a claim to a share of the property, including funds you contributed. Courts may interpret your assistance as a gift, not a loan, if:
There is no formal loan agreement
Repayments haven’t been made
There’s no schedule or evidence of an expectation of repayment
Without clear documentation, there is a real risk your financial help could benefit an ex-partner instead of staying within your family.
Get Legal Advice Before You Lend Money
If you're considering helping your child financially, it’s vital to get legal advice from an experienced family lawyer. At Craigieburn Lawyers, we guide local families through these situations with:
Practical advice tailored to your unique family and financial goals
Legally sound documents that protect your interests
Clear guidance on your options—from private loan agreements to formal legal structures
We understand that these discussions can be sensitive, but taking a proactive approach is far better than trying to fix things after a dispute arises.
Is It a Loan or a Gift?
Parents often assume they’re offering a loan, but in legal terms, it may be seen as a gift if not documented correctly. A loan should include:
A written agreement
Repayment terms
Interest (optional but helps show it's a loan)
Security, such as a caveat or mortgage
If none of these exist, a court may determine that the money was a gift, which generally cannot be recovered in a property settlement.
What Should a Family Loan Agreement Include?
A properly drafted loan agreement—created with the help of a family lawyer in Craigieburn—should include:
The amount loaned
Terms of repayment (e.g. monthly instalments)
Interest rate (if any)
What happens if the relationship ends or property is sold
Any security (such as a caveat or mortgage on the title)
We work with families to ensure these agreements are clear, enforceable, and appropriate for your situation.
Additional Legal Structures That Offer Protection
Beyond a loan agreement, your lawyer may suggest additional legal tools, such as:
A Declaration of Trust: Clearly outlines ownership rights
A Registered Mortgage: Provides stronger legal backing for your loan
A Binding Financial Agreement between your child and their partner: Ensures your contribution is protected in the event of separation
A Caveat on the title: Prevents the property from being sold without your knowledge
As experienced property and family lawyers in Craigieburn, we help clients put these protections in place before problems arise.
“Won’t Legal Agreements Damage the Relationship?”
We often hear from parents who worry that asking for a formal agreement could offend their child or their child’s partner. In our experience, however, clear documentation leads to less conflict—not more.
Having the right legal advice sets the tone for healthy, respectful boundaries and avoids uncomfortable assumptions or disputes later on.
When Should You Speak to a Craigieburn Lawyer?
We recommend speaking to a lawyer if:
You’re planning to loan (or already have loaned) money to your child who is in a relationship
Your child is separating from a partner and family money is involved
You want to protect your contribution with a formal agreement or legal structure
Even if you’ve already given money, it may not be too late to formalise the arrangement or seek legal advice on protecting your interests.
Final Thoughts
Helping your children get ahead in life is admirable—but it should never put your financial future or family relationships at risk. With the right legal advice, you can provide support while also protecting your contribution and avoiding future disputes.
At Craigieburn Lawyers, we regularly assist parents with structuring family loans, drafting clear loan agreements, and implementing strategies to safeguard their financial assistance. Our local team of family lawyers in Craigieburn is here to guide you through the process with sensitivity and care.
Thinking of helping your child with a property purchase or loan?
Get in touch with Craigieburn Lawyers today for practical, confidential advice. Call us we’re here to help protect what matters most.