How is Money Given By Parents Dealt with in a Property Settlement
In this video, Page Provan Managing Director and Accredited Family Law Specialist Bruce Provan, addresses how money advanced by parents to one of their children is treated in a property settlement.
My name is Bruce Provan, I’m the Managing Director of Page Provan Family and Fertility Lawyers. We’re a firm of lawyers in central Brisbane that practises exclusively in family and fertility law.
The question we’re sometimes asked by clients is, how is money advanced by parents to one of their children treated in a property settlement? Does it get included in the pool of property available for distribution between their child and the new partner, or is it excluded?
And the answer to that question is, it depends. Every case is different. Now, it’s becoming more and more common for parents to give money to their child and their partner to try and assist them financially, and that’s all fine, but what happens when the couple separates?
Oftentimes, parents will say, well, they expect that money to be repaid, but it’s not that straightforward. And parents who are contemplating giving money to their child should get legal advice before they do so.
If the matter ends up in court, the court is likely to look at a number of factors to determine whether that money from the parents is a gift or a loan. Now, obviously, one of the things the court is going to look at closely is any documents that have been put into effect to affect this loan.
If there are no documents and simply money that’s being handed over, there’s a good chance that a court would say that that was never intended to be repaid and that it was intended as a gift.
Situation is different where there’s loans, especially if the loan has been documented in an agreement or if there’s a mortgage or other security taken over property and the other thing that the court will look at is whether there is a commercial interest rate paid on that money and whether there is, in fact, any repayments being made.
The situation we commonly see is parents give that money to their child and their partner. It’s not documented, there’s been no repayments made and in that situation, it is likely to be found to be a gift rather than a loan.
Now, there’s a school of thought that, look, it really doesn’t make a big difference whether money is a gift or a loan, because if money is gifted to a child and their partner, generally that will be regarded as a contribution on behalf of their child.
In other words, a gift to their child rather than to both of them. But in each case, it depends on the circumstances, and you should seek legal advice. Bruce Provan from Page Provan, Family and Fertility Lawyers.