When separating from a spouse the property is divided, but does that include contributions from your parents, should your former partner benefit from that gift?
It is not unusual for parents to financially assist their child to give them a head start in life. This may look like a sum of money, land, or even a property! The gift can be an enormous head start to their child.
Often this type of generosity is informal and undocumented. Most parents do not anticipate the breakdown their child’s relationship and do not consider the affect a separation may have on the property gifted to their child.
When the relationship breaks down, there must be consideration of how the contribution would be dealt with in a property settlement.
The Court may treat the contribution in two separate ways:
It must be noted that the other side will often assert that the contribution is a gift. In doing so, the contribution will form part of the asset pool.
You will need to consider if there were any written or oral terms agreed upon regarding the contribution. It may be a loan agreement if there is record of loan repayments, or if there is security taken for the loan.
The Court may find a contribution to be a loan in circumstances that there is a formal loan document.
However, in circumstances where there is little evidence to establish that the contribution was a loan, and no repayments had been previously made, it will be challenging to satisfy the Court that the contribution was a loan and it will likely be considered as a gift.
We recognise that it can be confusing to determine if a contribution from your parents is a loan or a gift. Please call us to make an appointment, Elena and the team look forward to helping you resolve your dispute.
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