Gifts vs Loans in Property Law

Gifts vs Loans in Property Law : What You Need to Know in New Zealand

What is a Gift?

A gift is money given with no expectation of repayment, this could be parents helping their children with a deposit or paying off a mortgage. Legally, gifts are given with the intention that the money will not be returned. Once a gift is made, you can’t change your mind later if you want the money back.

What is a Loan?

A loan, is money given with the expectation that it will be repaid, usually within a set timeframe. When the lender lends money to the borrower for a property purchase, they typically agree on repayment terms—whether it will be interest-free or incur interest, the duration and or payable on demand.

The key difference with a loan is the obligation to pay the money back to the lender.

Key Considerations: Gift vs. Loan

Some important factors to think about:

1. Impact of Separation:
   • If you (the lender) gift money to someone you are close to (the borrower) and they later separate from their partner, the ex-partner may be entitled to half of the gifted money. This is because gifts become relationship property when they are applied to relationship assets such as a house.
   • If the lender loaned money then the ex-partner would not be entitled to the money as both parties in the joint loan would have to pay back their half of the loan
2. Clarifying the Intent: It’s crucial to clearly establish whether you intend to give the money as a gift or a loan. This helps prevent confusion or disputes later. It is highly recommended that each party record their intentions in writing. A loan agreement or deed of gift ensures everyone is on the same page. We work with banks and mortgage brokers to ensure you get the right result.

Need Advice?

Each family and situation are unique, so it’s important to get the right legal advice before making a decision. Whether you’re planning to give a gift or loan and need guidance, feel free to get in touch with us for personalised advice.