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Repaying Loans or Gifts from Relatives made during the Relationship

Do you need to repay a Loan or Gift received during the relationship after separation 

If you got a loan from a family member or friend during the marital or de facto relationship does it have to be repaid after separation and who has to repay it?

What if you thought it wasn’t a loan but it was a gift?

If a loan or a gift is given to one party (or the couple jointly) during a marriage or relationship then that may become an issue after separation when the time comes for property to be divided.

It is quite common for family members to give money to their adult Child during their relationship to assist with buying a property or a car, to renovate a property, to assist with expenses after the birth of a child etc.

After separation, it can often be a bone of contention as to whether the money was a loan or a gift and whether it is to be repaid.

As to whether the money should be repaid, some of the things the Court will consider include:

 



 

 

  • what was the intention of the person providing the money at the time the money was lent;
  • is there any documentary evidence about the intention and basis on which the money was lent. Documentary evidence might include a contract signed at the time of the transaction, emails etc.

If money was lent to the parties, then that loan will be taken into account in calculating the property pool for division between the parties.

Usually, the Court will order the adult child who is related to the family member who lent the money (rather than the “in-law” spouse) be the one who is liable to repay the money to the family member.

If the Court does that, then they usually allow some other asset or cash adjustment to be made to them to take account of the fact that they are assuming sole responsibility for repayment of that loan amount.

 

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