A Deed of Debt (also known as a “Deed of Acknowledgement of Debt” is a great way to formalise a loan of money or assets to another person. A Deed of Debt is particularly useful for recording a loan between parents and children for the purpose of purchasing a home.
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Deed of Debt
What is a Deed of Debt?
A Deed of Debt is used to record a loan between two people, making it clear that the borrower must repay the money or return the property by an agreed time.
The person lending the money or property is the Creditor, and the person receiving it is the Debtor. These Deeds are especially helpful when lending to a trust or when parents loan money to a child for a home deposit. They work best when the loan is interest-free and both parties want clear, written terms.
Is there anything else I should consider?
Yes. If the loan is to someone in a relationship, think about how it could be treated in a separation. A Deed of Debt helps, but a relationship property agreement offers added protection. Also, consider whether the loan will ever be forgiven, and if so, plan how that will be documented over time.
What do I need to keep in mind when making a Deed of Debt?
It is important to ensure that you fully identify the people involved, and who is giving and receiving the loan. The amount to be repaid is also crucial.
Anyone entering into a Deed of Debt should always be aware of any tax or financial consequences that may follow (for example, whether interest applies and how it is to be repaid).
We recommend that you seek legal and tax advice before entering into a Deed of Debt. Agreeable would be happy to help connect you with a lawyer who could provide that advice.
Why do I need a Deed of Debt?
A Deed of Debt is a simple way to formally record a loan. It outlines who’s involved, the amount loaned, whether it’s interest-free, and how and when it will be repaid.
From our experience, these Deeds are especially valuable when parents are helping an adult child—often in a relationship—buy a home. The Deed documents the loan to the child and provides a clear record if there’s ever a separation or relationship property dispute down the line.
If the child is in a relationship, it’s wise to also consider a relationship property agreement. This helps protect their equity and ensures the loan from their parents is recognised in any future split.
Who should use a Deed of Debt?
Anyone lending money or assets where they expect repayment. This includes parents loaning money to children for a home, loans between family members, or lending to trusts. It’s especially useful when you want clear terms and a written record to avoid future disputes.
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