Gifts of Money or Inheritance Received During a Marriage or De Facto Relationship

Introduction

If you have received a gift of money or an inheritance during a marriage or de facto relationship you may feel concerned about how these funds will be treated legally should the relationship break down. A generous gift from a parent or an inheritance received during the relationship by one partner can substantially impact the division of assets during a separation. Having to face this issue alone can feel overwhelming and never ending, but there is no need to worry – the team at Maguire & McInerney are here to assist you to understand your rights and entitlement. 

This article is designed to provide you with a clear understanding of the legal considerations of gifted funds or an inheritance received during a relationship, the impact of the gift or inheritance on the division of assets, and practical advice for those receiving such funds. 

Legal considerations of gifted funds

A gift of money or an inheritance received during the relationship may be considered a financial contribution however this may be complicated if there is no evidence to prove who the gift or inheritance was intended for. If a gift was made by one spouse’s parents, then generally it is deemed to be a contribution made by that particular spouse, however it is necessary to look at the evidence of the individual case to determine whether it will be deemed a contribution made by one spouse or both. For example, in the matter of Kessey v Kessey (1994), the wife’s mother gifted the parties $75,000 to undertake improvements to the family home held in the wife’s sole name. The court determined that a contribution by a parent of one spouse of a marriage is taken to be the contribution of the spouse whose parent gifted the funds unless there is evidence to establish otherwise. 

In the matter of Gosper v Gosper (1987) the wife’s father transferred land into both parties jointly. The court found that the contribution was a contribution of the wife because the gift was “made only because of the relationship and in reality as a means of benefiting that relative in that marriage”. In this case it was held that it is important to look at the intention of the gift giver and whether there was an ‘intention to benefit both parties or only his or her child’.

In family law, some parties argue that a gift of money was a ‘loan’. In determining whether the funds were a gift or a loan, it is necessary to look at whether a loan agreement exists, whether any repayments have been made or whether there is any other evidence such as emails or text messages that confirm that the funds are a gift or loan.

Impact of gifted funds on the division of assets

So, how exactly do gifts of money received during a marriage impact the division of assets during a separation? 

Once a gift of funds or inheritance is received during the marriage or de facto relationship, it usually forms part of the asset pool and will be available for division of assets at separation. How the gift of funds or inheritance is divided depends on a number of factors. For example, whether the gift of funds or inheritance was received early in the relationship or late in the relationship, how the funds or inheritance were applied and the length of the relationship are some of the factors that need to be considered when assessing the division of assets. Accordingly, it is important to obtain independent legal advice about your individual circumstances. 

Navigating the intricacies of dividing assets during a separation can be challenging, but the Family Law Act offers a detailed roadmap for a fair distribution. Courts take into account a variety of factors such as contribution to the acquisition and maintenance of assets, and the needs of each party and children. Asset division can vary based on the length of the marriage, assets involved and other unique case elements. No one case can be exactly the same as the next, so it is important that your circumstances are clear and understood. 

Practical advice for those receiving gifted funds

If you are in a relationship and receiving gifts of money from parents, it is important to understand the potential impact of these gifts on the division of assets in the event of a separation. One safe and practical step that you can take to help protect your interests is to ensure that there is clear documentation of the gift or inheritance, such as a letter confirming the recipient of the gift or evidence of the inheritance. For example, bank statements confirming the deposit of funds. This documentation can help to demonstrate the nature of the gift and what the giver intended for it, which can be very important in the situation of divorce.

In the event of a dispute related to gifted funds, there are several options for resolving the issue. Mediation is one such option and can be a cost-effective and less confronting way of resolving disputes. If mediation is unsuccessful, Court proceedings may be necessary to resolve the issue. Regardless of the specific situation, it is important to seek legal advice to help ensure that your rights are understood and protected and the situation is resolved in the best possible way.

Conclusion

In conclusion, it is vital to understand the intricate nature of gifts of money in the context of family law. A gift of money or an inheritance can have a significant impact on the division of assets in the event of a separation. It is important that you obtain legal advice regarding the impact on a settlement prior to agreeing to a settlement with your partner. This will ensure you understand your rights and will be able to protect your interests.  

If you are facing a similar issue to this or looking to learn more about legally protecting your assets in a relationship, get in touch with Natasha Hewlett from Maguire & McInernery Lawyers today on 4228 5911. Natasha is an experienced Family Law Partner with over 10 years experience in family law and is able to provide you with expert legal advice.

FAQs

Can receiving an inheritance or gift of money have an impact in a divorce?

Yes, a generous gift from a parent or an inheritance received during the relationship by one partner can substantially impact the division of assets during a separation.

Is a gift from my parents to my partner and I considered shared assets if we break up?

A contribution by a parent of one spouse of a marriage or de facto relationship is taken to be the contribution of the spouse whose parent gifted the funds, unless there is evidence to establish otherwise.

Is a gift and a loan treated differently?

Yes. In determining if funds were a gift or a loan, it is necessary to look at whether a loan agreement exists, whether any repayments have been made or whether there is any other evidence such as emails or text messages that confirm that the funds are a gift or loan.

How is the separation of inheritance decided when a relationship breaks down?

There are a number of things to consider, including whether the gift of funds or inheritance was received early in the relationship or late in the relationship, how the funds or inheritance were applied and the length of the relationship.

Important Disclaimer: The material contained in this publication is of general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.