Page 4 - Wealth-Adviser-Issue-137 (FWP)

ISSUE 137
MAY 2026

Where the lender intends the loan to be repaid into the estate, the
agreement and the will should be consistent on that point. Inconsistency
between the two is a frequent cause of family disputes after a parent’s
death, and the cost of those disputes — financial and otherwise — usually
exceeds the cost of getting the documentation right at the outset.

advance to an adult child may be difficult for the executor to and have you discussed with the first mortgagee wheth-
recover or even identify; the surviving family may dispute er a second mortgage in favour of the parents would be
whether it was a loan or a gift in the first place. Where the acceptable?
lender intends the loan to be forgiven on death — sometimes • For couples making the same advance to different chil-
equalised against other children’s inheritances — the will dren at different times, are the arrangements document-
should say so explicitly, with reference to the loan agree- ed consistently, so that the question of equalisation can
ment. Where the lender intends the loan to be repaid into be addressed cleanly when it eventually arises?
the estate, the agreement and the will should be consistent • If you are receiving an Age Pension or close to claim-
on that point. Inconsistency between the two is a frequent ing, have you considered how the arrangement is most
cause of family disputes after a parent’s death, and the usefully characterised under the means tests — as a loan
cost of those disputes — financial and otherwise — usually (asset, deemed income) or as a gift (deprivation rules)?
exceeds the cost of getting the documentation right at the • Does your will reflect the existence of any outstanding
outset. loans to children and specify what happens to them on
your death?
Worth Thinking About
A few questions to bring to your next adviser conversa-
tion or family meeting. References
• For any significant advance to an adult child, has the • Berghan & Anor v Berghan [2017] QCA 236.
arrangement been documented in writing at the time of • Biltoft and Biltoft (1995) FLC 92-614.
advance, or is it still operating on the basis of conversa- • Family Law Act 1975 (Cth), section 79.
tions and bank transfers? • Bankruptcy Act 1966 (Cth), particularly Part IV (provable debts and
• If interest is not charged, do the other terms of the proof of debt requirements).
agreement (repayment schedule, demand provisions, • Australian Financial Security Authority (AFSA), Treatment of debts in
acknowledgement of debt) do enough work to establish bankruptcy — Official Trustee Practice Statement 8.
the arrangement as a genuine loan? • Services Australia, Gifting (gifting free area and deprivation rules).
• Where the loan is substantial — for instance, a deposit on • Federal Circuit and Family Court of Australia, Financial or property —
a child’s home purchase — has security been considered, Bankruptcy in family law practice guidance.

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