Are Gift And Loan Back Arrangements Still Enforceable?

Gift and loan back arrangements are controversial but have historically been popular. The popularity of these arrangements arose from the fact that it provided a mechanism to protect assets particularly in circumstances where someone is conscious of being sued or being pursued by creditors. However, a recent case of Re Permewan No. 2 [2022] QSC 114 (Re Permewan), the Queensland Supreme Court has set aside these arrangements as being invalid and unenforceable, which will have a significant impact on existing arrangements.

What are gift and loan back arrangements?

A gift and loan back arrangement is a strategy that allows individuals to protect their assets. The process of doing so usually involves a person gifting an amount (to a 'lower risk entity' which they also control such as a trust) which mirrors the value of the equity held in the asset they are trying to protect. The gifting is usually done through promissory note or cheque. The lower risk entity will then