Lending money to family? Get it in writing

TLDR: Across Queensland, lending money to family is one of the kindest things you can do – and one of the easiest ways to end up in an awkward (or expensive) spot. A simple loan agreement spells out the terms, protects your money, and keeps the relationship intact. It also settles the big question: is this a gift or a loan? Here’s what to think about before you transfer a cent.

Bank of Mum and Dad is one of the biggest lenders in the country. Parents helping kids into a first home, a loan to a sibling starting a business, a hand-up to a relative going through a rough patch – it happens in Queensland families every day.

And most of the time it’s done on trust. No paperwork, just love and a bank transfer. Which is lovely, right up until someone forgets the details, a relationship changes, or a relative’s marriage breaks down and suddenly your money is part of someone else’s property settlement.

Getting it in writing isn’t cold or distrustful. It’s the opposite – it protects everyone.

Why a family loan agreement is worth it

A written agreement does a few important jobs:

• It proves the money was a loan, not a gift. This is the big one (more below).
• It sets clear expectations. How much, when it’s repaid, whether there’s interest. No “I thought you meant…” arguments later.
• It protects your money if things change. If your child separates from a partner, a documented loan can help show the money should come back to you rather than be split.
• It protects the relationship. Funny how being crystal clear upfront saves a lot of resentment down the track.

The gift vs loan trap

Here’s the mistake that catches people out. If you give your kids money and don’t document it, the law may treat it as a gift – meaning you have no right to get it back, and it could be carved up in a family law dispute or counted oddly in your estate.

If it’s genuinely a loan, you need to be able to show that: a written agreement, a repayment expectation, ideally some record of repayments. If it’s genuinely a gift, that’s fine too – but document that, so it’s clear in your estate and nobody’s fighting about it later.

The point isn’t which one you choose. It’s that you decide, write it down, and avoid the costly grey area. This ties straight into estate planning, too – if you’ve gifted or loaned money to one child and not the others, your will should account for it. Our wills and estates team can help.

Mortgage or no mortgage?

For bigger amounts – like helping with a house deposit – some families register a mortgage over the property so the loan is secured. If the loan isn’t repaid, you have a claim against the property itself. For smaller amounts, a standalone agreement without a mortgage usually does the job. We can talk you through which makes sense.

What goes in a family loan agreement

A good one covers the loan amount, whether interest applies, the repayment schedule (or that it’s repayable on demand), what happens on default, and whether it’s secured. We keep them clear and readable – no impenetrable legalese.

How we can help

We draft family loan agreements all the time, and we do it in plain English. A standalone loan agreement is $2,000, or $2,200 plus lodgement fees if you want it secured with a registered mortgage. We only ever act for one side, so if we’re acting for you as the lender, your family member should get their own quick independent advice – no awkward conflict.

Thinking about lending to family? Talk to us about a loan agreement and do it properly. Not sure you even need one? Read do I really need a loan agreement?

Lending money to family: FAQs

Should I charge my child interest on a family loan? You don’t have to – many family loans are interest-free. The key is to write down whatever you decide so everyone’s clear. There can be tax considerations for larger or interest-bearing loans, so it’s worth a quick chat with your accountant too.

Is a family loan safe if my child gets divorced? A properly documented loan is far more likely to be recognised in a family law settlement than an undocumented “gift”. It’s one of the main reasons parents put these agreements in place.

Is it a gift or a loan? Whichever you intend – just document it. An undocumented transfer is often treated as a gift, meaning you can’t get it back. If you want repayment, you need a loan agreement showing that.

Do family loans need to be in writing to be legal? A verbal loan can be legally valid, but it’s very hard to prove. Writing removes the doubt.

Can Empire Legal act for both me and my family member? No – we only act for one party to avoid any conflict of interest. The other person should get their own independent advice.