Helping children into property: when is financial support a gift, loan or ownership interest?
With house prices continuing to stretch many first-home buyers, it is increasingly common for parents to help adult children into the property market. That support may take different forms: a deposit contribution, an interest-free or low-interest loan, allowing children to live at home while they save, guaranteeing bank lending, or helping with initial ownership costs.
These arrangements are often made with goodwill and trust. Difficulties can arise years later, however, if no one clearly records what was intended. Was the money a gift? Was it a loan to be repaid? Or did the parents expect to retain an ownership interest in the property?
The Court of Appeal’s decision in Liao v Liao[1] is a useful reminder that family financial assistance can have significant legal consequences, particularly where expectations are not properly documented. The Court confirmed that the presumption of advancement continues to apply in New Zealand to adult children, meaning that parental contributions may be presumed to be gifts unless there is evidence supporting a different intention. The Court also emphasised that the outcome of any dispute will ultimately depend on the evidence surrounding the arrangement and the parties’ intentions.
What happened in Liao v Liao?
In 2012, Ms Liao purchased a residential investment property in Glen Innes, Auckland. Her parents contributed approximately 10% of the purchase price. Ms Liao funded the balance through her own savings and a bank loan and mortgage, and the property was registered in her name.
Several years later, her parents asked her to transfer the property to them They asserted the property had been purchased on the basis that it would belong to them, and argued that Ms Liao held it on a resulting trust for their benefit.
Ms Liao’s position was that the money from her parents was a gift. The dispute therefore required the Court to consider how the law treats financial contributions by parents to adult children when there is limited contemporaneous evidence of what the family intended.
The legal issue: gift, loan or ownership interest?
When money is contributed towards a property purchase, the legal character of that contribution matters. Broadly, it may be:
- a gift – with no expectation of repayment or ownership;
- a loan – to be repaid on agreed terms; or
- a contribution that gives rise to a beneficial ownership interest in the property.
In many cases, the answer will be obvious because the arrangement has been clearly documented. Unfortunately, family arrangements are often informal, and disputes can arise many years after the funds were advanced.
Where the parties’ intentions are not clearly recorded, equity may apply presumptions to help determine the outcome. These presumptions are only starting points. They can be displaced by evidence of what was actually intended.
Presumption of resulting trust
A resulting trust may arise where one person contributes money towards the purchase price of property that is registered in another person’s name. In those circumstances, the law may presume that the contributor intended to retain a beneficial interest in the property, usually proportionate to their contribution. This is known as the presumption of resulting trust.
For example, if a parent contributes $100,000 towards the purchase of a $1 million property registered in a child’s name, the starting presumption may be that the parent retains a 10 per cent beneficial interest. That presumption can be displaced if the evidence shows the money was intended as a gift or loan instead.
Presumption of advancement
The presumption of advancement operates in certain recognised relationships, including the relationship between parent and child. Where it applies, the law may presume that a parent intended to make a gift to the child, rather than retain an ownership interest.
That presumption has been debated in a modern context, particularly where adult children are financially independent. In Liao v Liao, the Court of Appeal confirmed that the presumption of advancement remains part of New Zealand law and can apply to adult children, including financially independent adult children.
What did the Court decide?
The Court of Appeal dismissed the parents’ appeal. It held that the presumption of advancement continues to apply in New Zealand to transfers from parents to adult children. The Court’s reasoning was that the parent-child relationship is not reduced to a legal duty of financial support. It also reflects unique emotional ties that may endure regardless of the child’s age or financial independence.
On the facts, the Court was satisfied that the evidence rebutted the presumption of resulting trust. Ms Liao had contributed significant equity of her own, taken on substantial mortgage liability, and dealt with the property in a way that supported her ownership. The Court therefore did not need to rely on the presumption of advancement to reach the result.
Practical lessons for families
For parents and children entering into financial arrangements, the practical message is straightforward: record the arrangement clearly before the funds are advanced or before settlement occurs.
If the intention is… | Consider documenting… |
A gift | A short deed or written acknowledgement confirming that no repayment or ownership interest is expected. |
A loan | A written loan agreement recording the amount advanced, repayment terms, interest position (if any), default consequences and what happens if the property is sold. |
An ownership interest | A co-ownership agreement, declaration of trust or other ownership document recording each party’s interest, decision-making rights and exit arrangements. |
Clear documentation becomes particularly important where:
- significant sums are involved;
- the property is intended to be an investment;
- the child has, or may later have, a partner;
- there are multiple children who may later have inheritance expectations or later expect equal treatment; or
- a family trust is involved.
Evidence of later discussions or conduct may be relevant, but it is usually less reliable than clear documentation created at the time.
Families should also think about relationship property, estate planning, tax, bank lending and asset protection issues before funds are advanced. Where asset protection is an important objective, families should consider obtaining advice on appropriate structures and whether a contracting out agreement under the Property (Relationships) Act 1976 may be appropriate.
Final comment
Helping children into the property market is often one of the most significant financial contributions parents will make during their lifetime. As Liao v Liao demonstrates, arrangements that seem clear at the time can become the subject of genuine disagreement years later if expectations have not been properly documented.
Whether support is intended as a gift, a loan or part of a broader wealth transfer strategy, families should take the opportunity to consider how the arrangement aligns with relationship property planning, trust structures, succession objectives and estate plan. Clear documentation and thoughtful planning at the outset can help protect both family wealth and, just as importantly, the relationships that sit behind it.
Whether you are providing financial support or receiving it, taking advice before funds are advanced can help ensure everyone has the same understanding of the arrangement and that it is structured in a way that reflects the family’s intentions. A relatively small investment in planning at the outset can provide clarity, minimise the risk of future disputes and give all parties greater certainty for the future.
Special thanks to Partner Alysha Hinton and Law Graduate Jade Gawtrey for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
[1] Liao v Liao [2026] NZCA 250
