10 Reasons to get legal advice before lending money to family

Lending money to a family member may seem like a simple, well-intentioned gesture; after all, it’s someone you love and trust, what could possibly go wrong? But when financial arrangements between family members go awry, the emotional and financial fallout can be significant. As one of Christchurch’s leading legal practices in family law and civil litigation, Weston Ward and Lascelles are unfortunately highly experienced in seeing how these disputes over money roll out. With fractured familial relationships and financial stress, the nice gesture transforms into a protracted legal battle.

To avoid the risk of a family fall out, we strongly recommend seeking legal advice before lending money, even to those closest to you. You may feel reluctant to pay legal fees, but by doing so you have an opportunity to protect your money and, more importantly, your relationships. Here are ten compelling reasons how consulting a lawyer before handing over funds keeps your loan safe: 

1. Clarify whether it’s a loan or a gift

In legal terms, there’s a world of difference between a gift and a loan. If your family member later claims the money was gifted, rather than loaned, you may have no legal recourse to recover it. This is particularly problematic when there’s no written agreement.

At Weston Ward and Lascelles, we help you define the nature of the transaction clearly and legally. A simple clause or agreement makes the difference between a repayable loan and a regretted gesture of goodwill.

2. Create a legally binding loan agreement

Unlike selling or buying a property which always require a written contract, some verbal promises can be legally binding. However, they can be complex to uphold up in court, and even trickier to enforce. Enforcing a verbal contract relies on being able to demonstrate all the legal requirements of a legal contract have been met, i.e. including offer, acceptance, consideration, and an intention to create legal relations. From reading the previous sentence, you are likely feeling hot under the collar imagining the legal costs required to recoup your money.

Weston Ward and Lascelles team specialise in civil litigation in Christchurch and can draft a legally binding contract to protect both parties. Should the matter result in a dispute, you have a signed legal loan agreement that is not open to discussion.  



3. Avoid confusion and misunderstandings

When financial agreements are vague (or even on the back of a beer mat), misinterpretation and misunderstandings are inevitable. Was the money exclusively for a house deposit, so why has it been used to fund a luxury overseas trip? Was it an early inheritance, or did you expect it to be paid back within six months of them starting work? Clear legal documentation ensures that everything is black and white, and everyone is on the same page.

4. Protect your money with a property trust

If the money is being used to help a family member buy property, rather than loaning money, you could consider placing the property into a trust. This allows you to retain a measure of control.

Our property law and property solutions NZ experts can assist you in structuring the arrangement, so your financial contribution is protected, whether it’s your child buying a first home or helping a sibling during financial hardship. It’s always wise to seek advice on the most tax efficient way to hold money and property – just ask!

5. Adapt your Will to reflect the loan

People forget that lending money can affect the distribution of their estate. For example, if you've loaned one child $50,000 but not the other, this has the potential to create friction later after you’ve passed. Contact Weston Ward and Lascelles Christchurch Wills and estate planning lawyers can review your Will to reflect any loans or gifts made during your lifetime. This ensures your intentions are clearly expressed and avoids conflict among beneficiaries.

6. Protect the loan in case of relationship breakdown

Under relationship law in NZ, loans between family members can be caught up in property settlement proceedings if your family member separates from their partner.

Our team provides specialist legal advice on relationship law and property law in Christchurch, helping you structure the loan so it’s not absorbed into relationship property. It hits extra hard when your money ends up as part of someone else’s divorce settlement.



7. Engage business lawyers for larger loans

If you’re lending a significant sum that resembles an investment (for example, helping a relative start a business) you should seek guidance from a lawyer experienced in business law and business advisory services. Weston Ward and Lascelles’ business lawyers based in Christchurch can advise you, whether for shareholder agreements, personal guarantees, or security over assets, our team will ensure you’re not left vulnerable if the business fails or disputes arise.

8. Know your options if they can’t—or won’t—repay

Without a contract, your ability to recover unpaid loans will be fact dependent.  If your relative refuses to pay or simply disappears, civil recovery will need to be sought through the courts. We provide proactive solutions. We’re always keen to explore mediation and alternative dispute resolution but, if necessary, we can represent you in court. Unsurprisingly, having a solicitor involved early in the process tends to encourage repayment without the need for legal action.

9. Prevent financial abuse or manipulation

Unfortunately, not all family relationships are healthy. In cases where there’s pressure, coercion, or emotional manipulation involved, a lawyer acts as an impartial buffer to ensure your consent is informed and voluntary. This is particularly important for elderly family members or those in vulnerable situations. Our lawyers offer supportive, confidential guidance in these sensitive cases to protect our clients’ best interests.

10. Preserve the relationship

Ultimately, legal advice isn’t just about protecting money, it’s about protecting relationships. A well-drafted agreement creates transparency, removes ambiguity, and sets clear expectations. By involving a neutral third party like Weston Ward & Lascelles, you shift the focus from "family favour" to "mutual agreement", preserving goodwill between loved ones and preventing feelings of betrayal, entitlement, or resentment down the track.

How Weston Ward and Lascelles’ law firm in Christchurch can help

Lending money to family may come from the heart—but it should also come with sound legal planning. Don’t assume goodwill, family honour or a shared history will be enough to protect you. At Weston Ward & Lascelles, we understand that family and money are a complex mix, and the legal advice and support we give is tailored to your specific situation. 

Contact Weston Ward and Lascelles and call 03 379 1740 today to schedule a consultation with our experienced lawyers in Christchurch.

Let’s make sure your kindness doesn’t become a costly mistake.