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.