The ‘Bank Of Mum and Dad’ In Family Law Disputes

The ‘Bank of Mum and Dad’ or BOMAD refers to financial support that parents provide to their children, primarily for purchasing a home. With the increasing cost of housing and mortgage rates, it is becoming more and more common for people aged between 25 to 34 to receive assistance from their parents to enter the property market. 

The BOMAD may provide assistance by a number of various means, including:-

1. Gifts;

2. Loans;

3. Guarantor loans;

4. Equity release; or

5. Co-purchasing.

What happens, however, if the child’s marriage/relationship breaks down?  How is the BOMAD’s assistance treated?

In Australia, the relationship of parent and child gives rise to a legal presumption that money advanced to the child is intended to be a gift unless there is evidence to the contrary. In order for the assistance to be a loan, it needs to be properly documented with each party obtaining independent legal advice. 

Couples can also enter into a Financial Agreement during their relationship which sets out how any assistance from the BOMAD is to be treated in the event of a separation. Again, both parties need to obtain independent legal advice for a Financial Agreement to be binding.

If the assistance is characterised as a gift, the party who received that gift from their parents can claim it as a financial contribution that they made and seek an adjustment in their favour. 

The key with any assistance from the BOMAD is to ensure it is documented – a handshake or a hug simply won’t suffice in the event of a separation.

If you require assistance with documenting any assistance from the BOMAD, please contact our office.