Can I recinde a gift of cash and replace it with a Promisorry Note if the other party agrees?

UPDATED: Oct 1, 2022

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Can I recinde a gift of cash and replace it with a Promisorry Note if the other party agrees?

I wanted to lend some money to my son to help him buy a house. The lender required it to be a gift and not a loan. We both would like it to be a loan. Now that escrow has closed and he has the cash available from sale of his previous home, can we change this to a loan and eventually have it paid back?

Asked on September 10, 2018 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

1) What you describe would be considered fraud on the lender: converting a gift used to qualify for a mortgage to a loan would be seen as showing that the "gift" was never a gift, but was always a loan--simply that you lied about that fact. If this somehow came to the lender's attention, they could take legal action, including potentially rescinding the loan and requiring its immediate repayment.
2) The note would not be enforceable. To be enforceable, a promissory note must meet the criteria to be enforceable as a contract; that requires that each side give the other consideration, or something of value. But your son already has the money; you are not giving him anything in exchange for his promise to pay; therefore, there is no consideration and the note would not be enforceable. If you son chose to not honor it, there is no way you could enforce it.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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