Parent to Child loans - Tips for parents considering making loans to their children

February 19, 2026

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It is becoming common in today’s society for parents to help their adult children by giving them a financial kick start in life – but don’t let your generosity come back to haunt you.

When contemplating providing financial assistance the starting point for parents is to decide whether the monies are to be advanced as a gift or a loan.

In most cases, particularly where larger amounts are involved, parents generally wish to advance monies as a loan. Where this occurs, we often see disputes arising because the child:
  • becomes involved in Family Court proceedings. Their spouse claims the monies were a gift and wants a share,
  • decides to dishonour agreements made with their parents due to a breakdown of the relationship,
  • becomes bankrupt and their trustee in bankruptcy seeks to have the funds classed as an asset instead of a liability, or
  • tries to depart from the agreement upon the death of the parents, leading to disputes between siblings and other beneficiaries.
Unfortunately, in most of the above situations it is up to the parents (or their executors) to prove that monies advanced were loans and not gifts, and that they remain owing by the child. In order to be successful, a clear paper trail and proper loan agreements are required.

Sadly, too many of these monetary advances are either never documented, or documented without assistance from suitably experienced lawyers.

Tips for parents considering making loans to their children
  • Ensure the loans are acknowledged in writing by both the children and the children’s spouse/partner. This makes it harder for a child or spouse to renege on the agreement later.
  • Ensure that the child makes at least some repayments of the principal or pays interest annually. This will help to confirm the arrangement as a loan.
  • Consider taking security over the loan, such as a mortgage. This will better protect you should a dispute arise involving a spouse or creditor. If your loan agreement is not secured by a mortgage, in the case of bankruptcy, you will be just another unsecured creditor and may never be repaid.
  • Update your estate planning documents to ensure that they reflect your intentions regarding the loan. Will it be forgiven on death? If so, will the other children be compensated with a greater share of the estate?
  • Ensure your accountant, advisor, executors and attorneys are aware of the loan and your intentions concerning whether the loan is to be forgiven or repaid.
  • Consider what is to happen with the loan if your child dies before you.
  • Seek advice as to who ought to lend the monies. Will you lend personally, or will an entity associated with you lend the monies?
  • Seek advice on the tax implications to you.
At Bailiwick Legal, we are experienced in parent to child loan agreements (secured and unsecured). We can guide you through the potential pitfalls, offer you sound legal advice and ensure that the arrangement is documented in a robust manner.

Contact us at (08) 9321 5451 to discuss your issue further.
Image of Challa Station lakes after rain.
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Bailiwick Legal has been honoured to support Forever Wild over the past few years as they delivered one of the most significant conservation land acquisition programs undertaken in Western Australia. Our team assisted Forever Wild with the strategic purchase of four pastoral stations, Narndee , Boodanoo , Meeline and Challa , transactions that now connect three State Reserves and protect more than 12,000 square kilometres of land. To put that scale into perspective, the combined area is approximately five times the size of the ACT and nearly one-fifth the size of Tasmania . Navigating complexity at scale These were not straightforward property transactions. Each acquisition involved: Multiple pastoral leases Layered regulatory and approval pathways Significant operational and on-ground assets Numerous stakeholders across government, industry and land management Our role was to guide Forever Wild through this complexity with clarity, precision and confidence, ensuring each transaction progressed efficiently while managing risk and safeguarding long-term objectives. “ Forever Wild is creating a world-leading model for nature funding that demonstrates we can manage viable, working pastoral stations whilst also restoring and protecting local ecological flora and fauna, and engaging and supporting Indigenous people and local communities. Complex & challenging, but this initiative could literally change the world .” Jessica Brunner - Director, Bailiwick Legal A growing and evolving legal landscape Large-scale conservation acquisitions sit within an emerging and increasingly complex legal field , intersecting land tenure, pastoral regulation, environmental frameworks and commercial considerations. These matters demand a deep understanding of both the legal mechanics and the practical realities of operating in regional and remote Australia. Our team’s experience in agribusiness, pastoral land transactions and regulatory approvals allowed us to support Forever Wild at every stage, from strategic structuring through to completion. Proud to support leadership in nature finance Forever Wild is widely recognised as an industry leader and a steadfast advocate for nature finance initiatives , helping pave the way for greater accessibility and innovation in conservation funding and land stewardship. We are proud to have contributed our relationships, expertise and practical legal insight to help Forever Wild achieve its vision, and to have played a role, however small, in shaping a groundbreaking future for conservation in Australia. At Bailiwick Legal, we value the opportunity to work alongside organisations that are thinking long-term, acting boldly, and creating outcomes that extend well beyond the transaction itself. For assistance with all of your agribusiness needs, contact Bailiwick Legal on 08 9321 5451 or email office@bailiwicklegal.com.au For further information about our legal services, please visit our website: https://www.bailiwicklegal.com.au The above information is a summary and overview of the matters discussed. This publication does not constitute legal advice and you should seek legal or other professional advice before acting or relying on any of the content.
Aerial image of Rawlinna Station
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Our June 2024 newsletter is now available. Have a read to find out what we have been up to in the first half of the year!