‘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.