Financial Contributions - Relatives
During a marriage or relationship it is common that parents of one or both of the parties will help by providing financial assistance or care of the children. The help provided by parents may be taken into account in assessing how property is to be divided.
What happens when money has been provided by parents?
Often parents of a party to a relationship provide financial assistance such as:
- a lump sum amount to help the parties to buy a house;
- periodic sums to help the parties meet their weekly living expenses;
- accommodation to the parties for a period of time enabling the parties to save money;
- interest-free or low-interest loans to the parties;
- security for the parties to obtain a loan to buy a house;
- distributions from trusts that are controlled by the parents.
The financial assistance provided by parents is not usually a problem until the parties to the relationship or marriage separate. When parties separate, questions arise as to how the parents’ financial contributions are taken into account. There is no simple answer to this question and the following will need to be taken into account:
- Was the financial assistance a gift to one of the parties or both of them?
- How much was provided by the parents?
- When was the financial assistance provided?
- Did the parties have any agreement with the parents about the financial assistance?
Usually, financial assistance provided by parents is considered to be provided for the benefit of the party to whom they are related. For example if a wife’s parents provide $200,000 to help the parties to buy a house then the $200,000 is considered a contribution made by the wife if the parties separate. This may increase the share that the wife receives in the overall property settlement.
Things parents should consider when providing financial assistance include:
- whether the financial assistance is a gift or a loan to be repaid
- having a loan agreement drawn up if the financial assistance is a loan to the parties;
- having the parties provide security for the loan to be repaid;
- the effect of distributions from a trust to the party who is their child.
Gifts from family members
In family law matters parties often receive gifts during their relationship or marriage. Gifts can include:
- Monetary gifts. For example a gift of $50,000 from a family member that was applied towards the purchase of a property, or a gift of $10,000 from a friend that was applied towards landscaping the front garden of the property, or a gift between spouses to discharge debt.
- Indirect gifts. For example, a member of a party’s family renovating the property or providing housing for the parties rent-free.
When dealing with gifts, the first step for the court is to determine ownership of the gift, or in other words, which party was the intended recipient of the gift. Therefore, an argument can arise as to whether the gift was intended for one party or for both of the parties. To determine this, the court will need to consider the evidence provided by the parties. If a gift is made to both parties by a relative of one party, it is open to that party to argue that the gift was a contribution made by them and it was intended that they benefit from the gift (given their relationship). If, however, it is found that the gift was intended for both parties the gift may be regarded as an equal contribution of both parties.
The court will then also need to consider whether the gift was actually a loan intended to be repaid by one party. It is common in family law matters for parties to argue a gift was a loan by one person intended to be repaid by the parties.
Once the court has determined which party was the intended recipient of the gift, the court will then take into account when the gift was received, the quantum of the gift and how it was applied, the duration of the parties relationship and the quantum of the asset pool (among other factors) to be divided, when considering what, if any, percentage adjustment should be made to the recipient of the gift.
If you or the other party received a gift during your relationship and would like to discuss your family law matter with one of our qualified family lawyers please contact Armstrong Legal.