NSW Gift vs Loan- parents demanding repayment

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Lookingforanswers18

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25 February 2018
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Hi there,

My wife and I initially received, for all intents and purposes, a gift of money in 2014 from my wife's parents. My wife says that her parents offered us some money to help us with investments. There was nothing to our knowledge that it was anything but a gift. We used the money to invest in property.

Fast forward to 2018, the parents have suddenly demanded that we pay interest on the gift, claiming that it was loan. We've disputed this, saying that it was a gift. The amount gifted was significant, so it would cause us significant financial issues given that we've invested money believing it was a gift. The parents are not under financial hardship (if anything, they're doing quite well).

There is no written contract, no verbal contract (although the parents claim they had said they'd need the money back someday), and no financial repayments made to them.

Initially, my wife and I were quite emotional, and in order to try and keep the peace, agreed to give them the money in the near future. However, upon reflection, we're deciding not to because this is unfair- we would not have taken the "gift" if it was a loan. My father in law has texted my wife with his bank details, and my wife has responded saying that we'll pay them 1/3rd of the amount requested this year, 1/3rd next year and the remaining in the year after. She used the words "the money we owe you" in a text message recently, this was not to imply that we agreed that it was loan.

Legally, if we decide to not give them the money, where do we stand?
If we do give them the money voluntarily, can they pursue us for interest owed, and a claim to the investment properties that we used their "gift" money to invest in?

This is a very emotionally charged situation, any help and advice would be great.
 

Rob Legat - SBPL

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16 February 2017
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You’ve acknowledged that it was given on the basis of it being paid back “someday”, your wife has acknowledged it is a loan and you’ve used it for investments purposes (the last being a minor point).

You’d be hard pressed to argue it’s a gift.

However there is no repayment schedule, so trying to reclaim all of it now would probably be unreasonable if it is a large amount. A third each year may be acceptable.

The issue of interest is difficult. On one hand it’s a loan from a family member, so that counts against interest. On the other, it was for investment purposes. This would assume you’re making money out of it, which might give weight to an argument that you should pay some form of premium on the funds. Perhaps you could consider giving them a share of the realised profits as a compromise.
 

Rod

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It is a tough situation.

Ignoring the family issues, the parents would have been hard pressed to claim a loan but for the latest texts.