Historically, parents continued to be parents long after their children become adults, marry, and sometimes have their own families. Many of the parents loan their children money from time-to-time or to purchase their first home. When the marriage turns bad and a divorce is filed, the parents often want their loan(s) repaid.
Due to the inherent trust between parents and children and joy surrounding a marriage, anecdotal evidence of divorce lawyers reflects parents and children often do a poor job of documenting such loans. This makes it difficult to impossible for judges to determine if the sums were a gift or loan, principal amount, interests or payments. In this situation, the litigants (the divorcing spouses) or their parents have three ways they might be able to establish loan so it is accounted for in repayment in the course of a divorce.
The first is to put on evidence of this loan at trial. This is perhaps the weakest way to try to establish this marital debt without a written loan document, repayment schedule, and the like. It is within a trial court judge’s discretion to determine this is a gift and marital asset/liability. With a written set of documents, this may be sufficient.
The second way to have the (adult-litigant) divorcing spouse to join their parent(s) as necessary parties to litigation so they can make them heard. In other words, the parent would be named as a necessary party in the litigation to present evidence about the loan, repayment terms, and amounts owed. Obviously, that parent would need counsel, so if the loan is not a large amount the time and legal fees may not justify this.
The third and final way a parent (perhaps if estranged from the divorcing adult child) can make his or her loan known and amount, repayments, and terms is to move to intervene in the divorce case. If granted, then that party would put on this evidence and argue this amount is to be accounted for (i.e., repayment) by the division of the marital property and order of the court.
As a general rule, if this is not done during the divorce litigation, it is very hard to accomplish later, and expensive, requiring a separate lawsuit. We hope you find this blog helpful understanding the ways Indiana trial judges may account for monies loaned by family (and friends) during the divorce process. This blog was written by attorneys at Dixon & Moseley, P.C. who handle divorce cases throughout the state of Indiana.