How the Australian Family Court deals with money advanced by parents of a party following a separation
In the modern world of exorbitant property prices underpinned by a cost-of-living crisis, there has been an observed increase in parental generosity to assist their children get a foot in the door in the Australian property market. Often, those parents with the capacity to do so are willing to help their child, though have reservations about what will happen to the money they advance should their child go through a separation (or divorce). This article will examine how the Family Court (FCFCOA) deals with money advanced by one party’s parent(s) in the context of a de facto separation or marriage breakdown.
Is it a gift or a loan?
The starting point is to analyse the intention of the money advanced – was it a gift or a loan? Arguably, this is one of the most common preliminary questions that the Family Court faces when money has been advanced by one party’s parent before, during or after a relationship.
Sometimes, there will be an enforceable, documented loan agreement. Often, this is not the case. In the absence of documentation or other admissible evidence that the circumstances of the transaction should be categorised as a loan (or any other recognisable commercial transaction), the money will likely be deemed a gift.
Was it a gift to one of or both parties?
In the Family Court, the starting point is that the money will be treated as having been gifted only to the child of the parent unless there is evidence that establishes it was not the intention of the donor parent to benefit only their child (and by extension, the party’s spouse or de facto partner). Therefore, the evidentiary burden effectively shifts to the spouse (or de facto partner) who is not the child of the generous parent to convince the Court that they did not intend to only benefit their child.
How is a gift from a parent treated by the Family Court following a separation?
Unless the party who is not the child of the generous parent is able to establish that they intended to gift the money to both parties, the contribution of the generous parent will be taken to be a contribution made by or on behalf of the party who is the child of the generous parent only.
However, it is important to remember that the contributions assessment undertaken by the Court is not done so arithmetically or by way of “overly pernickety” analysis (quoting leading case law). The discretionary exercise is undertaken holistically, and the gift from the generous parent is weighed with consideration to the myriad of all the other contributions made by both parties throughout the whole course of the relationship (including before and after). There are a number of other factors to consider including but not limited to: the length of the relationship, whether there are any children of the relationship, the other assets of the parties, and both party’s current and future circumstances. Everyone’s situation is unique and there is no single answer.
Therefore, if you have recently separated (or are contemplating a separation), and either (or both of) your parent or your partner’s parent have given money to either of you, it is important to get tailored advice as to how that money will be treated and your entitlements from family law specialists such as those at Doolan Callaghan Family Lawyers.
Our North Shore and Northern Beaches family law specialists’ team have over 80 years of combined family law experience.
Call us on 02 9984 7411 to book your initial consultation with a family law specialist.
