LawTalk Blog

Gifts in Family Law property settlements

family law money gift or loan

Scenario:

In 2005 Adam and Eve were married. They had been a de facto couple of several years prior to marriage and had jointly purchased a home together in 2004. In 2006 Adam and Eve received $100,000.00 from Eve's parents.

Eve's parents sold some shares on the stock market and gave the proceeds to Adam and Eve stating verbally "here is some money to help a young couple along in their early marriage". Adam and Eve directly applied the entire $100,000.00 to the mortgage on the home they purchased together in 2004.

Adam and Eve separated in January 2014. Adam wants to know if he has any entitlement to the $100,000.00 that was gifted to him and Eve during the marriage or whether he has no claim as it was Eve's parents who gifted the monies.

Answer:

First, several aspects of this scenario would have to be critically examined by a lawyer. For example:

1. Was the money a "gift" or "loan" from Eve's parents?

2. Was the money given exclusively to Eve or to Adam and Eve jointly?

3. Was a loan agreement involved in any way?

The answers to these questions would have to be investigated by Adam giving detailed instructions to his lawyer about any specific conversations, detailed transactions or documentation regarding the monies. The lawyer would then be able to establish a basis for Adam's position with respect to the $100,000.00.

Generally where monies are given as a gift to one or both parties of the marriage and then such monies are directly applied to the asset pool, for example paying off the mortgage of the marital home, those monies would be included in the asset pool for division.  If the gift was given specifically to one party then it may be arguable that they are entitled to a greater share of the value of that monetary gift when the asset pool is divided as it was a contribution to the asset pool made on behalf of the "wife's" parents.  

The Family Law Court will also look at the time the gift was given in assessing what division will be made with respect to the monies. For example, if it was a long twenty-five year marriage and the gift was given twenty-four years ago, it may be viewed as having less significance than if the gift was given two years ago. This is known as the "erosion" principle. 

In conclusion, a "gift" in a family law property settlement will turn on the individual facts of the case.


Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.


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