Tony had helped all three of his children with deposits for their first homes. His two older children had purchased well before the property boom of the early 2020s, but his youngest son, George, had panic-bought at the height of the market. George and his partner ended up with a substantial mortgage, and because Tony had more than he needed, he decided to give them more than the older children had received to help ease the burden. Tony rationalised this by telling himself that George was buying a house similar to those of his siblings, and it was not his fault that property had become so much more expensive.

Tony did not consult his lawyer when he advanced the funds to George. He told George that the money was a loan and would be recorded in the notebook labelled “George”, where Tony kept a record of all the money he had advanced to him, including funds for his first car and to repay his student loan. Tony also had notebooks for his older children, although the amounts lent to them over the years were considerably less than George had received.
Tony considered whether he should amend his will to ensure equality among his three children if he died. At that point, he consulted his lawyer. The lawyer explained that loans to children were often forgiven upon death under a will, or Tony could include a clause stating that each child’s loan would form part of that child’s share of his estate. Alternatively, if Tony did nothing, each child would be required to repay his or her loan to Tony’s estate upon his death, which would neatly equalise their positions.
The lawyer questioned whether the loans had been properly documented and encouraged Tony to put formal loan agreements in place. Tony, who was somewhat sensitive to legal fees, said he did not think that was necessary. All three children knew about the notebook system and understood that the funds were being recorded to ensure fairness among them. He also decided not to amend his will, reasoning that the children’s loans could simply be “repaid” to his estate and used to even out their inheritances.
Unfortunately, Tony died following a brief illness some years later. By then, George had moved to Wellington and had little contact with his older siblings. When the lawyer called to discuss the will and explain his understanding that the notebooks recorded the amount George owed Tony’s estate, George, influenced by his new partner, claimed that the money had been a gift and that there had never been any intention that it be repaid. He argued that it was only fair for him to receive more than his older siblings because they had bought their homes and attended university when everything was cheaper. He did not believe his father had ever intended to achieve fairness between the siblings.
George’s older sister and brother were horrified by his attitude. They argued that the entire purpose of the notebooks was to record what each child had received so that everything could eventually be balanced. George quickly engaged a lawyer and asserted that, unless an advance to a family member was formally documented as a loan, it was treated as a gift for legal purposes. He argued that his father had many opportunities to amend his will or ask him to enter into a loan agreement if that was what he intended, but had never done so.
George’s stance caused a major rift in the family, one that would never fully heal. The situation is an important reminder that family financial arrangements should be properly documented and, just as importantly, reflected in your estate planning. When circumstances change, it is essential to review and update your will so that it continues to reflect your intentions and helps reduce uncertainty and the risk of disputes between those you leave behind.

Tammy McLeod, Managing Director, Davenports Law