Hidden Loans: A Nasty Surprise During Your Divorce

 Posted on December 11, 2013 in Family Law

Beware of "gloans" in a divorce.  A gloan is a gift that becomes a loan just because you are divorcing.

A gift to your spouse from parents or really any person which becomes suddenly a marital loan owed to that person during or even prior to a divorce is a "gloan " -- a gift that becomes a loan because of a divorce. Gloans are a form of Hidden loans.

For example, your spouse may produce a neatly signed IOU or promissory note saying that the gift from his parents used as a down payment for your marital residence is now, like magic, presto: "a bonafide loan." A loan that you thought was a gift to you becomes a binding debt that you and your spouse owe to his parents.

Where does that repayment come from?  Well, your soon to be ex-spouse says: from joint or marital assets before those assets are divided between the two of you. Therefore you get less of the marital assets since the payment of debt including the newly minted loan to his parents is paid off the top.

Protect yourself from gifts of money from parents, grandparents or friends which can become loans by getting a gift letter signed by the person making the gift confirming that the monies given are gifts that do not need to be repaid later. Or perhaps have your spouse sign a postnuptial agreement that states that the gift is not a loan but indeed a gift.

If you are in the process of divorce or need legal advice, contact an Illinois family law attorney by calling 630-920-8855.