How to Handle Gifts From Parents During Separation
A common issue that arises when couples separate is how to deal with significant gifts from the parents of one of them during the relationship.
Parents (or other family members) often make monetary gifts to allow a couple to buy property, transfer real estate to one or both spouses, or provide rent free accommodation in a property owned by the parent. Such generosity may be significant in helping the couple get into Australia’s expensive property market.
The child of the generous parent will often feel that generosity should be treated as a gift just to themselves individually (not the other spouse) and entitles them to a larger share of the matrimonial assets. The other spouse may feel that it was a gift to both of them and reflects the affection of the parents for both spouses.
Most couples can reach an agreement about this issue, helped by their lawyers. But what would the Family Court do in the absence of an agreement?
The principles applied by the Court are reasonably clear.
The usual approach is:
- Where a gift is made solely to the parent’s child, it is treated as a gift to the relative child and therefore a contribution made on their behalf.
- What if the property or gift is transferred to or given to both spouses? Even then, the usual approach is the gift will be treated as a gift just to their child – even if it benefited both of them and was used for the joint acquisition of property by the couple. The logic of this is that the parent intended the gift to benefit their own child and the gift would not have been made to the other spouse if they were not in a relationship with their child.
- This usual approach can be overridden if there is clear evidence that the gift was made to both children. Transfer of property to the joint names of both parties or the transfer of funds to a joint account is not normally sufficient. The “clear evidence” can be hard to obtain. It might include emails or Christmas cards etc where a clear intention to benefit both spouses was expressed. It could be a statement to a bank of such an intention in support of a loan application of the couple.
- “Clear evidence” contrary to the presumption of a gift just to the relevant child, can be difficult to establish. In most cases, gifts a contribution by a parent of a party to a marriage to the property of the marriage will be taken 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.
