Quite a few Kiwis that are buying their first home (or another home) are helped by parents that want to “gift” them or “loan” them some money.
Gifting Should Be Recorded
A Deed of Gift is a great way to formalise an intention to gift money or assets to someone. A Deed of Gift is particularly effective for recording a gift from parents to children for the purpose of purchasing a home.
If parents are giving one of their children money without expecting or requiring anything in return, then you will probably be making a gift.
In that case, a Deed of Gift is right for you.
Acknowledging A Debt
A Deed of Debt (also known as a “Deed of Acknowledgement of Debt”) is a great way to formalise a loan of money or assets to another person.
A Deed of Debt is particularly useful for recording a loan between parents and children for the purpose of purchasing a home. If parents are making a loan to their children by giving them money that they must pay back, then this is probably making a loan and a Deed of Debt is right for you.
In most cases a Deed of Debt is treated very much like a gift and the agreement
Is A Deed Of Debt Better Than A Gift?
A Deed of Debt (also known as a “Deed of Acknowledgement of Debt”) has some key advantages over gifting money, and would often be recommended by solicitors and mortgage advisers as a more prudent way to record any gift or loan.
In particular the advantages are:
The “debt” can be interest free and with no requirement for any repayments, so for the children and the bank it is treated in a very similar way to a gift.
If parents are wanting to help a child they may want to “gift” their child money, but have concerns that if their child and partner separated the partner will want to split the assets 50/50. The money that was gifted is effectively then the child’s money and that too would normally be part of any 50/50 split. If instead of being a gift it was a “debt” then that would need to be repaid to the parents on the sale of the property and that way it does not become part of the assets that get split.
If the property is sold for whatever reason the debt becomes due to be repaid.
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These are agreements that you can buy online for a fraction of the normal price, fill out the short questionnaire, then the Agreeable team can help you edit the Deed to fully reflect your intentions.
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