Lending to Family or Friends? Why You Still Need a Written Loan Agreement
It’s a familiar story — someone close to you needs a hand, and you’re in a position to help. Maybe it’s a sibling starting a business, or your adult child needing support with a first home deposit. You trust each other. You’ve had a chat. You know they’ll pay you back.
But here’s the reality: life happens. And when money is involved, things can become complicated — fast. At Alpine Legal, we regularly help clients deal with loans that were once made in good faith but were never properly documented.
A handshake or a casual promise may feel fine at the time, but without something in writing, you could be left unprotected if things go wrong.
Why It Matters — Even with People You Trust
One of the biggest problems with informal loans is that everyone remembers the arrangement differently. Was it a gift or a loan? Was interest supposed to be paid? Was there a deadline?
And more importantly: what happens if the person you lent the money to goes through a divorce, or passes away?
Let’s say your son borrows $100,000 to help buy a home. Years later, he and his partner separate. Without a loan agreement, that money could be treated as a contribution to the relationship — meaning his former partner may walk away with a share of it. You might never see that money again.
Or perhaps you lent funds to a friend who dies unexpectedly. If nothing is in writing, their estate might classify the money as a gift, not a debt — and you’re left with no legal right to recover it.
These are real-life situations, and they can be heartbreaking — especially when families are already dealing with grief or conflict.
What a Simple Loan Agreement Can Do
A basic agreement can be enough to give everyone clarity and protection. It should include:
The loan amount
Repayment terms (dates, instalments)
Whether interest applies
Whether the loan is secured
What happens in case of default
What happens if either party dies
Signatures and the date
We often recommend including a clause about what should happen in the event of relationship breakdown or death — it’s a small detail that can prevent major disputes later on.
Gifts vs Loans: Clarity Is Key
One of the most common legal battles we see is over whether the money was a loan or a gift. And if you don’t have a written agreement, courts often presume it was a gift — especially in family law matters. That can make it extremely difficult to recover the money, no matter how clear it felt to you at the time.
Don’t Let Money Damage Your Relationship
You might feel awkward asking a loved one to sign an agreement. But setting clear expectations from the start is one of the best ways to protect the relationship long-term. It’s not about mistrust — it’s about fairness.
A written agreement protects both sides and reduces the risk of misunderstanding, resentment, or legal disputes in the future.
How Alpine Legal Can Help
We prepare loan agreements that are practical, clear, and tailored to your situation and we’ll make sure all the risks are considered.