Isabella had contributed a significant sum towards the purchase of a home by her daughter and son-in-law, on the understanding that she would live there on her own, paying rent and contributing to maintenance costs. After some years Isabella’s relationship with her daughter and son-in-law deteriorated and Isabella feared she would be kicked out of the house and left without her lump sum. Things took a turn for the worse when Isabella was asked to begin paying utility bills and sign a tenancy agreement, neither of which were part of the original agreement.
Isabella was growing increasingly anxious as the relationship fractured further. Her stress and anxiety peaked when her daughter and son-in law advised that they were moving to Queensland and intended to move into the property. Additionally, they stated that Isabella’s ex-husband – who perpetrated domestic violence against her – would also be moving in. Isabella knew she had to get out.
The daughter and son-in-law offered to repay Isabella half of the money she had contributed but she refused the offer. Isabella returned to the Seniors Legal and Support Service seeking to have her original contribution repaid in full. The Seniors Legal and Support Service provided legal advice to Isabella, including negotiation with the other side’s solicitor. The SLASS social worker provided counseling and support to help with her anxiety and stress.
Isabella was eventually repaid 85% of her original contribution, a direct result of advocacy by the SLASS lawyer. Isabella was extremely happy with the outcome. She immediately moved into a rental unit and reported feeling less anxious and stressed. Isabella was very thankful to the SLASS staff for their assistance.
Some legal considerations when giving financial gifts and loans
Questions to ask yourself when gifting or loaning money
- Is the loan in writing and does the written document have the legal effect I intend?
- In circumstances where purchasing property or living together is involved – have we discussed what will happen if one of us changes our mind in the future and we no longer want to live together?
- Have I checked with Centrelink about whether my present or future Centrelink entitlements will be affected?
- Can I afford to live without the money?
- Am I being pressured to provide the gift or loan?
- Do I feel that I must provide a gift so that my friend or family member continues to care for me?
- Why can’t the person borrow money from a bank or other lender?
- Is the person a bad credit risk (are they unlikely to be able to afford repayment)?
- How will the gift or loan affect my relationship with the recipient and other members of my family?
- Can my relationship with the family member or friend withstand the possibility that they may not repay the money?
- How much do I really know about the financial affairs of the family member or friend?
- Do I need security for this loan?
- Have I sought independent legal advice prior to entering into the loan agreement?
- Do I also need to speak to my accountant or financial adviser?
There is a set amount of money an aged pensioner can gift without it affecting their pension. Centrelink also allows aged pensioners to have some money in the bank, and money above an allowable limit that is gifted to another person can be considered money in the bank even though it is neither in the bank nor available to spend.
What to do if things go wrong
Prevention is best when it comes to gifts and loans of money between family members. When both parties understand their rights and obligations from the start, disputes are less common. Unfortunately, most disputes arise when there is little written documentation. These disputes are difficult to resolve. The more documented and the more detailed the material, the easier to resolve most disputes—so write receipts, make copies of letters and keep everything. Seek URGENT legal advice from a solicitor. Do not delay. Community legal centres are good places for initial advice. If Centrelink is a problem seek the assistance of a financial services information officer (FISO) at Centrelink. These officers’ role is to assist people to maximise their Centrelink entitlements. If you first talked to Centrelink and acted on their advice that then turned out to be incorrect, you may be entitled to compensation. Independent legal advice from Basic Rights Queensland, a community legal centre specialising in Centrelink matters, may also help.