It is not uncommon in family law property disputes, which arise upon the breakdown of a marital or de facto relationship, for one party of the relationship to have received property or money or some other asset from their parents or other family members. We are asked if the other party can make a claim against that asset such that it can be the subject of a court order. The short answer is yes.
The value of this asset will be considered to be the contribution of the party, whose family gave them the asset. This will be particularly relevant when a determination is made as to how the relationship assets should be divided, because the Family Law Act provides that to do so, an assessment must be made of both the contributions and the future needs of both parties. So, if all other things are equal, the party whose family gave them the asset can expect to get a greater share of the relationship assets. Some weight is given to this greater contribution, or in other words an adjustment is made in favour of the party who is deemed to have made the greater contribution.
However, this may not be altogether equitable, particularly where that asset received makes up most or all of the relationship assets.
Some further protection can be afforded to this asset, if instead of it being gifted to the parties, it is loaned and is therefore returnable or repayable. Care should be taken to ensure that this arrangement is properly documented, and preferably at the time the loan is given.
There have been many cases where a parent has given money to a child who applies it to purchase property with their partner, and upon the breakdown of that relationship, that party and his or her parent maintain that the money was not gifted but was lent. Disputes then arise as to the true nature of the arrangement. Courts will take into account any evidence to support the assertion of the loan such as whether or not there is an written agreement, and if not, does the conduct of the parties suggest that it was a loan (ie. Have repayments been made, were there discussions about repayment, has the loan been recorded in any financial statements etc).
It again is not uncommon for parties to allege that is was a loan and that it was “repayable upon demand” being made by the lender for the money to be repaid. The courts have determined that in these situations, the Limitation Of Actions Act (This is Queensland legislation but there is similar legislation in most other states) applies, and if a demand is not made within 6 years from the date of the advance, then the right to claim the money is lost.
Accordingly it is very important to ensure that proper consideration is given to the documentation that can be put in place at the outset, to ensure that advances of these types are protected.
There are of course a number of other avenues available to afford protection including:-
- Binding Financial Agreements (made either before during or after a relationship)
- Establishment of trusts
- Mortgages or other like charges