Tis the sea­son: a word about gifts in your fam­i­ly law prop­er­ty settlement

It’s the time of year where most of us are busi­ly engaged in buy­ing last-minute gifts for our friends and loved ones, look­ing for that per­fect gift. 

For some of us, that will involve very gen­er­ous gifts to our fam­i­ly mem­bers, per­haps of mon­ey 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, in fam­i­ly law finan­cial cases.

Gifts between your­self and your cur­rent / for­mer partner

Gen­er­al­ly, gifts between part­ners will form part of your per­son­al effects for the pur­pos­es of for­mal­is­ing a prop­er­ty set­tle­ment. This is because the rel­e­vant val­ue is the sec­ond-hand val­ue (not the insur­ance val­ue!), which is like­ly to be much less than what the item ini­tial­ly cost. 

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 to argue about retain­ing the item would like­ly be more than the val­ue of the item itself. 

How­ev­er, when nego­ti­at­ing your prop­er­ty set­tle­ment, it is impor­tant to be clear about the per­son­al effects you are retain­ing, where those items were giv­en to you by your 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. Pets (whilst often regard­ed as a mem­ber of the fam­i­ly) 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!

Hig­gins is a recent Full Court deci­sion where the appli­cant gave a house to the respon­dent, an escort. The par­ties sub­se­quent­ly mar­ried, how­ev­er 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 she had received.

The Bank of Mum and Dad

It is not uncom­mon for fam­i­ly mem­bers to make sub­stan­tial gifts of cars and house deposits to one or both par­ties to a rela­tion­ship. This has increas­ing­ly been the case in recent years, with huge increas­es in hous­ing costs in 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 con­duct 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.” 

In Bar­ton, the hus­band’s aunts gift­ed him a prop­er­ty which, at the time of the final hear­ing (2009), was val­ued at $2.45 mil­lion. This gift­ed prop­er­ty, in val­ue terms, rep­re­sent­ed half the asset pool avail­able for distribution. 

In this case, the Court held that even though the prop­er­ty was trans­ferred into the hus­band’s sole name, the inten­tion of the aunts 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, the Court said that while the evi­dence was clear that land gift­ed by the wife’s father had been trans­ferred into the joint names of the par­ties, 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, even though it was trans­ferred into joint names. 

In Gosper, 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 or fam­i­ly mem­ber (or anoth­er 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.

If the Court deter­mines that the advance is a loan that is repayable, then gen­er­al­ly, lia­bil­i­ties are treat­ed as joint debts that come off the top” of the asset pool before assets can be distributed. 

Things to think about if you are con­sid­er­ing loan­ing or gift­ing money 

Often, loans to fam­i­ly mem­bers are made on very infor­mal terms – a con­ver­sa­tion, then a bank trans­fer. This can then cause sig­nif­i­cant dif­fi­cul­ty should the recip­i­ent of the loan find them­selves in prop­er­ty proceedings. 

If you are con­sid­er­ing loan­ing mon­ey to a fam­i­ly mem­ber, or bor­row­ing from a fam­i­ly mem­ber, it is ben­e­fi­cial to all par­ties to ensure there is a for­mal loan agree­ment, set­ting out the funds to be loaned, inter­est payable, and terms of repay­ment. Then, it is impor­tant that par­ties adhere to the agree­ment! Fail­ure to do so could lead to the loan being deemed a gift.

If mon­ey is to be giv­en to a fam­i­ly mem­ber, it is also impor­tant to be aware that the val­ue or weight of that gift, in terms of a prop­er­ty set­tle­ment, will dimin­ish with time. 

If you have any con­cerns aris­ing out of a gift or loan to fam­i­ly or friends, con­tact Swaab to speak with one of our accred­it­ed spe­cial­ists in Fam­i­ly Law, who can advise you as to the legal impact of your gift on fam­i­ly law proceedings.