May 11, 2022

Loans from the “Bank of Mum and Dad”


Have you received large sums of money from your parents or another person? Would you like to protect that money from your ex-spouse?

Our expert family lawyers encounter these situations very frequently.


Loan or contribution?

If you can prove that the money was loaned and the lender can and will enforce the loan against you, it is likely that the loan would be recognised by a Court. It will then be notionally deducted from the rest of the asset pool, before the balance of the pool is divided between the ex-spouses.

If the Court doesn’t accept that there was a loan or finds that the loan cannot or is unlikely to be enforced, the money may instead be treated as a contribution. A contribution has the potential to increase the proportion of the asset pool that you receive in the property settlement.

There are many issues to consider when dealing with loans from family. For example:

  • If there is a loan agreement, are the terms of repayment clear, enforceable, and realistic?
  • Is the loan secured by a mortgage or a caveat?
  • Is there evidence that the funds actually came from your parents/family? This may be an issue where the source of the funds can’t be proven. For example, where the money was given in cash or where a bank transfer record can no longer be located. Another often encountered issue is where the funds were transferred from overseas with other people’s assistance.
  • Was the loan or gift disclosed to relevant authorities such as Centrelink, the bank or the Department of Home Affairs?
  • Is there evidence that your spouse was aware of the loan or gift at the time it was made?
  • For what purpose was the money given and how was the money ultimately used?
  • Has there been a history of repayment?


Get expert family law advice first

A common misconception is that just having a written IOU or loan agreement will prove that there is an enforceable loan, however, this is often not the case.

Our expert divorce lawyers have encountered on many occasions, a client who has tried to protect funds loaned by their parents/family from their spouse without having first obtained expert family law advice (e.g., by using inappropriate documentation) – in almost every situation, it has harmed that client’s case.

Loans from parents or family are complex and it is important that you obtain expert family law advice before acting. Our expert family lawyers in Ringwood and Mount Waverley can advise you on this and any other property matters you may have. Please contact us on 0421 397 316 or at for an obligation free chat.

Contact us

Fill in our contact form for a free 15-minute chat with a Family Lawyer

Your "TO-DO" List When Going Through Separation

Click below to download a free PDF checklist.