Gifts, Loans and Debts

Information for Older People

It can be hard to see someone you care about struggling financially. Older people often get asked to help when family members are in difficulty and it’s sometimes hard to say no. Whether you have a lot to give or a little, it’s important to know your rights and responsibilities and what can go wrong when you help someone financially.

This Help Sheet covers what you should think about when considering a loan or gift of money or other assets. It also covers going into debt for someone, going guarantor and providing security for a loan.

Don’t risk your future

At Seniors Rights Victoria we work with many older people whose efforts to help someone financially have resulted in the devastating loss
of their home and/or savings. In older age it can be impossible to recover from a financial loss, particularly if you are on a fixed income such as
a pension.

Before you agree to help someone out financially, ask yourself:

• How will I cope if I have to leave my home?
• Where would I live?
• How will I manage in an emergency if I don’t have my savings?
• Who will pay if I need special treatment or services later on?
• How will this affect my relationship with my other children?

Understand the risk

Someone who is unable to get the money they need from a bank or other lender is probably considered too risky for a loan. Ask yourself if you should take this risk. Think carefully about the person’s financial habits and methods. Even the most well-meaning and financially competent of people can make mistakes. Circumstances such as a relationship breakdown or job loss can bring big changes to a previously secure situation.

It’s OK to say ‘NO’

It can be difficult to say ‘no’ to someone you care about, particularly if they are going through difficult times or are used to getting your financial support.

Tips for saying ‘no’

• Explain that you don’t want to risk damaging the good relationship you have with them now.
• Let them know you have the right to protect your interests and that it has nothing to do with your love or trust of them.
• Give examples of what could go wrong, such as losing your home, and point out just how difficult it would be for you if this were to happen.
• Encourage them to explore other options for managing the problem.

Top tips when considering gifts or loans

1. Understand the risk. Consider why the person is unable to get help from a bank 
2. Think about your pension and entitlements. Changes to your financial situation may affect your Centrelink payments and tax entitlements
3. Plan and get advice before selling your home to move in with family. You may want to consider a Family Agreement
4. Think before you sign loan documents. Get independent advice before you sign
5. Be clear – is it a gift or a loan? Make sure you are on the same page
6. Keep good records. That way if things go wrong you will be able to identify who is at fault