Family Law | A word about gifts in your family law property settlement
Weddings, engagements, birthdays, Christmas … at some stage most of us will make a generous gift to a loved one. It could be cash for a house deposit, a car, a lovely piece of jewellery or a valuable family heirloom.
This article looks at how the Family Court and Federal Circuit Court have treated different kinds of gifts after relationship breakdown. It is important to bear in mind that the Court has wide discretion in such matters and therefore every case will depend on the particular facts and circumstances.
Gifts between you and your partner
Generally gifts between partners will be treated as property for the purposes of formalising a property settlement. With personal effects such as jewellery the dollar value of such items will be the second-hand value (not the insured or replacement value), and this is probably much less than the item cost initially.
Most personal items such as home contents, jewellery, electronics, clothing and the like (unless substantial like a car) will be relatively modest in value, so the legal fees you would expend arguing about retaining the item would likely be more than the value of the item itself.
When negotiating your property settlement, it is important to be clear about the items you seek to retain, especially where those items were given to you by your ex-partner.
A puppy isn’t just for Christmas
Downey & Beale looked at ownership of a dog which the wife asserted was a gift to her from the husband. While pets are often regarded as a member of the family, they are dealt with by the Court in the same way as any other chattel or item of property.
In this case, the Court was guided by section 7 of the Companion Animals Act 1998 (NSW) which defines ‘owner’ as the owner of an animal, the person by whom the animal is ordinarily kept and the registered owner of the animal. The wife’s evidence, which the husband denied, was that the dog was an early birthday present to her. The Court held that even though the husband had initially paid for the dog and then had the dog registered in his name after separation, the wife had contributed to the dog’s care. The wife was ultimately the dog’s owner, and therefore she retained the dog.
You bought me a house!
In the Full Court decision of Higgins the applicant gave the respondent a house. The parties subsequently married but the marriage was short-lived.
The applicant sought that the property be transferred back to him, however the Court held that the applicant “got what he bargained for” and it would not be just and equitable to make such an Order. The wife retained the house, but had to repay the $180,000 interim property settlement that she had received.
The Bank of Mum and Dad
It is not uncommon for parents to make substantial gifts of housing deposits to one or both parties to a relationship. This practice has increased in recent years with huge leaps in residential property prices in Australian capital cities. So how are these gifts treated at separation?
In Kessey, the wife’s mother gave the parties $75,000 which was used to fund renovations to the matrimonial home. The Full Court held that this was a contribution on behalf of the wife to the assets of the marriage. The Court said that a contribution from a party’s parent is deemed to be a contribution “made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.” This is known as the presumption of advancement.
In Barton, the husband’s aunts gave him a property which at final hearing was valued at $2.45 million, representing half the value of the asset pool available for distribution. The Court held that even though the property was transferred into the husband’s sole name, the intention of the giver was to benefit both the husband and the wife. The Court held that the husband contributed to the property as to 90% and the wife contributed 10%.
In Gosper, a gift of land by the wife’s father was transferred into the joint names of the parties. The Court said that while the evidence was clear that often such a gift is “made only because of the relationship and in reality as a means of benefiting that relative in that marriage” the gift was held to be a contribution on behalf of the wife. The Court also said that “where a gift is made solely to the donor’s relative (for example a gift by parents to their married daughter) and that spouse applies that property to the marriage, that is a direct financial contribution solely by that party and will be assessed in the ordinary way alongside other contributions by each party to the marriage.”
Gift or loan?
If a parent, family member or other third party has advanced a significant sum of money to one or both parties to family law property proceedings, the “characterisation” of this advance may have a significant impact on the pool of assets available for distribution.
For example, if the Court determines that the advance of money is a loan, and therefore repayable, then it may be deemed to be a joint debt of the parties to be deducted from the asset pool before other assets can be distributed.
Things to think about if you are considering lending or giving money
Often loans to family members are made on very informal terms – a conversation followed by a bank transfer. This informality can cause significant difficulty should the recipient of the loan find themselves in a family law property dispute.
If you are considering lending money to a family member, or borrowing from a family member, consider whether there should be a formal loan agreement in place setting out the funds to be lent, the interest payable and the terms of repayment. If there is to be a formal loan agreement, it is important that parties adhere to the agreement, as failure to do so could lead to the loan being deemed a gift.
If you are considering a gift of money to a family member, it is important to be aware that in the event of a family law property settlement the value of that gift will diminish with time.
Our experienced family lawyers can advise you about the current and potential legal issues arising from a loan or gift involving a family member.