Helping children financially is something many parents do without hesitation.

It might be contributing towards a first home, helping with a house deposit, advancing money to help them get established, or stepping in during periods of financial pressure.

These arrangements are often made informally and with the best of intentions.

But unexpected changes can happen, and without careful thought and supporting documentation, that support can lead to unintended consequences.  

One of those consequences is that, in New Zealand, the law may presume that money advanced by a parent to a child was intended to be a gift.

As a general rule, if one person contributes money towards property that is put into someone else’s name, the law may presume that they intended to keep an interest in that property.

But there is an exception where a parent advances money to a child. The law instead presumes that the parent intended the advance to be a gift, rather than retaining an ownership interest or expecting repayment. This is called the presumption of advancement.

This principle reflects the unique relationship between parent and child and the enduring emotional ties that often underpin parental support, regardless of age.

That does not mean every payment from a parent is automatically a gift. The presumption can be displaced by evidence showing that the parties intended something different. But if intentions are never discussed or documented, proving that later can be difficult.

This issue can become significant later if:

• the child sells the property (does the parent get repaid?);
• family relationships break down (who owns what?); or
• the child separates from their partner.

A relationship separation can create unexpected outcomes

Parents may assume that if they help their child buy a property, that money will remain connected to their child.

That is not always the outcome.

If the child is in a relationship, and money is advanced without clear documentation, that money can be seen as a gift to which the other partner is entitled.

For example: The undocumented “loan”

Parents contribute $150,000 towards their daughter’s first home. Everyone understands that she will repay it eventually, but nothing is written down because the arrangement is based on trust.  

Years later, the daughter separates from her partner. Without evidence that the advance was intended to be a loan, it is considered a gift and therefore relationship property to which the daughter and her partner are both entitled.

Early advice and careful structuring can make a significant difference.

Document the arrangement

If you are planning to help your child financially, it is worth seeking legal advice and ensuring the arrangement is recorded clearly and correctly.

Questions to consider include:

• Is the money a gift?
• Is it a loan?
• If it is a loan, when and how is it to be repaid?
• Is any security required?
• Should there be acknowledgement of separate ownership or relationship property protections?

Family support and legal certainty are not mutually exclusive - but relying on assumptions can create difficult disputes later.

A short conversation and clear documentation at the start can avoid significant uncertainty down the track.