Over recent decades, many Australian families have relied on getting money from the “Bank of Mum and Dad” to help with home purchases.

But our latest research shows there are growing legal risks from that trend.

We spoke to 80 older parents and adult children. Most were from Sydney and had either given or received family money to help with buying a home. Typically, people in our study had provided or received an average of $75,000, though in one case it was $500,000.

We found both the parents and adult children in our study were often unclear whether the money was a gift or loan. Surprisingly few had even written down anything to make that clear.

That lack of clarity and communication has the potential to cause bitter family rifts, elder financial abuse and costly legal battles in the Family Court.

What counts as a gift?

If you’re applying for a home loan, many banks require written proof that funds from the “Bank of Mum and Dad” are genuinely a gift – meaning nothing is expected in return.

This is because a parental loan that needs repayments reduces how much the home buyer can actually afford to borrow from the bank.

In our study, some participants were asked to sign gift letters for their children to meet the bank’s requirements, even when they viewed the money as a loan. Henry, aged 60, described this scenario:

At the time we had to tell the bank that it was a gift. But in hindsight we said to [our son], ‘One day we’d like to see some of that come back to us’.........

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