Nelligan News
Reading Time: 2 minutes

In the ebb and flow of family life, very often parents give their children money or other assets. Most consider these transfers as gifts. Sometimes, families consider these as loans and some form of loan document is prepared.

Occasionally, however, a parent decides that a payment or series of payments should be treated as loans. This often happens if the payments have diminished that parent’s own assets to the detriment of the parent or to the rest of the family. But this may not have been not communicated by the parent to the recipient.

So when the parent dies, how is this “loan” addressed?

The executor of every estate is mandated to gather in the deceased’s assets and pay out the deceased’s debts before any payment is made to any beneficiary. One can see that a problem may arise if the executor considers the deceased’s transfer to a family member as an asset of the estate and therefore attempts to collect the loan from that family member while, at the same time, the family member alleges that the loan was actually a gift. A corresponding problem may also arise if the executor does not consider the transfer as a loan and makes no effort to collect same in the face of clear evidence that such a loan exists.

Evidence of a loan must either be in writing or be otherwise provable, such as through a family and non-family testimony. A simple statement in a will that “I have loaned money to my son John” will not be sufficient without other evidence of such a loan. In such a case, the “loan” will only be recovered by the executor if John is prepared to acknowledge that such a loan exists.

The solution in these situations is to ensure that if a parent does make a payment to a child and considers such a payment as a loan, this payment should be acknowledged in writing by that child. Clearly, this is easier said than done.

The alternative, however, is entering into litigation over the existence and collection of this loan. This usually has a tremendous impact on the entire family, not to mention the estate assets, which may then be used to pay for the litigation.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

Have Questions?

Enjoy this article?
Don’t forget to share.
Share on facebook
Share on twitter
Share on linkedin
Share on email

Related Posts

Business Law
Reading time: < 1 mins
Craig O'Brien on Behind the Headlines
In the latest episode of the Ottawa Business Journal‘s Behind The Headlines podcast, Craig O’Brien explains how rent negotiations can[...]
Real Estate and Development
Reading time: < 1 mins
Bryan Thaw on Behind the Headlines
Watch as Bryan Thaw discusses the pandemic’s effect on commercial real estate with Michael Curran of the Ottawa Business Journal,[...]
Real Estate and Development
Reading time: 3 mins
So You Want To Be A Landlord? A Primer In Buying A Tenanted Property
If you decide to purchase a residential property with a tenant occupying the property, there are some important procedures and pitfalls that should be considered. In our latest Real Estate blog post, Bryan Thaw outlines the key things a buyer should keep in mind.