Lending money? Create a paper trail
Can you “loan” me some money, I will pay you back, I promise.
I have received many phone calls from seniors who have “loaned” money to family or friends only to find out they are not going to get it back.
Unfortunately, many of them probably never had any intention of paying you back in the first place.
Recently, a senior loaned one of their adult children a lot of money. It was somewhere in the range of $60,000. This was the parent’s life savings. The adult child convinced the parent that they desperately needed the money for an investment. It was agreed that once the investment came through, the child would pay it back.
Well, in about a years’ time, the investment did come through and had done very well. But now, the child decided they were not going to pay their parent back.
Despite many different attempts over a year or so to get the money back, the child refused and eventually stopped all communication with the parent. Besides being broke financially, the parent also lost the relationship with their child over money.
If you want to loan someone money, regardless of who it may be, you need to protect yourself. Things may be peachy with the person borrowing the money and you may feel nothing will ever go wrong. But in my 30 years experience as a police officer, I have seen the most dedicated and loyal friendships and the closest families end up in a war.
The first thing you should consider is going to a lawyer and having loan papers done up properly. If for some reason you don’t do this, at the very least have a written promissory note done up. Make sure it has the date, the location of signing, witnessed by independent parties and that it contains all the details of the loan, how it is to be repaid and dates of when it has to be repaid by.
Consider using a cheque to give this loan instead of giving cash. The idea is you want to create a paper trail in case things go wrong.
If you have loaned money already and have no paperwork in place to protect yourself, and you are not being paid back, there may still be something that can be done.
In the case I am was talking about, the parent did not do any of the things that should have been done. They had nothing in writing. But they went to see a lawyer who was very successful in getting the money back from the adult child. You may still have a chance to get your money back, but will most likely have to seek the help of a lawyer to do so.
Hopefully, you will always have a good relationship with your children and friends, but one sure way to increase the odds of the relationship going bad is to start loaning money. The old saying “money is the root of all evil” is alive and well to this day.
You may feel that your son or daughter will get upset with you if you suggest that you want the loan drawn up legally with a lawyer. The reality is, it’s for everyone’s best interest.
Sgt. John Keating, Senior Support Coordinator
Durham Regional Police Service
905-579-1520 ext. 5624