The Risk to the Bank of Mum and Dad—and How a Binding Financial Agreement Helps

The recent decision of the Full Court of the Federal Circuit and Family Court of Australia in Han & Han, delivered in March 2026, highlights that:

After the breakdown of a de facto relationship/marriage, where there are court proceedings on property division, debts to family members will be heavily scrutinised and if the court finds that the debt will never realistically be enforced, it can be excluded from assessment of the asset pool to be divided.

This isn’t great news for parents who provide funds to a child, who is in a de facto relationship/marriage, for purchase of a home. If their child later separates, there is a real risk that those funds may not be paid back to the parents/may not be fully taken into account in a property settlement between their child and the child’s spouse.

For parents who are considering providing funds for the child’s home purchase, they should consider the following arrangements:

Having a binding financial agreement prepared, with the parties to the binding financial agreement being the parents who are going to provide the funds, their child and their child’s spouse. The binding financial agreement would provide that specific funds are being provided as a loan by the parents for the purchase of a property, and if their child and spouse separate and the property purchased is still owned, then the parents will be repaid the amount advanced and any agreed interest payments.

The Family Law Act provides that a binding financial agreement can be between spouses (de facto or married) and “one or more other people”.

After a separation, an application can be made to the Court to enforce binding financial agreement provisions as orders of the Court.

The parents could also require their child and their child’s spouse to agree to a formal written loan agreement and mortgage security over property purchased, so that if a property is purchased with funds advanced, and that property is sold prior to any separation, then the parents would get their money back.

This is general advice only and you should contact our Steven Edward to discuss your specific requirements and documentation required to protect loan arrangements.