Australia explains risks of financial help for adult children

In Australia, financial support for adult children from their parents, known as the 'bank of mum and dad,' can create legal and family risks if the parties have not discussed and documented the terms of the arrangement. As ABC News Australia reports, such assistance is used not only to buy housing but also to cover everyday expenses amid rising living costs. Youth sociologist and senior lecturer at the University of Newcastle Julia Cook and her team conducted a study involving 80 older parents and adult children. Most participants from Sydney provided or received family funds primarily to purchase housing. The average amount of such support was $75,000, although the sums ranged from $5,000 to $500,000. Gift or loan According to Cook, parents and adult children often understood the status of the transferred money differently: as a gift or as a loan. Study participants often did not formalize their arrangements in writing. The terms could change over time: a loan was effectively turned into a gift when an adult child had children or faced financial difficulties. More current news is available on the UA.News Telegram channel Telegram. Elizabeth Shaw, chief executive of Relationships NSW, noted that conversations about money are often avoided out of fear of causing shame. Unspoken loan terms, she said, may later lead to conflicts and tension in relationships with relatives, including brothers or sisters. What should be documented in an agreement Cook pointed out that banks may require written confirmation that funds from parents are a gift. Because of this, some study participants signed gift letters even though they themselves considered the transferred money to be a loan. Such arrangements can become particularly complicated if money is provided to a couple that later separates. Sydney family lawyer Gabriella Pomare advised documenting the nature of financial assistance. In an agreement, she said, it is worth specifying the amount, the borrower, whether interest applies, the conditions and procedure for repaying the funds, the consequences of partners separating or one of the parties dying, as well as security for the loan. For substantial sums, she recommended obtaining independent legal advice, particularly when a child is buying property with a husband, wife, or partner. Read us on Telegram and Sends Download our app