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Moneys provided by parents of wife - is it a gift or loan?


Watson & Watson receive enquires and instructions in relation to matters where parents of one or other of the parties have provided money to assist the married or de facto couple.  This often occurs when the couple seeks to purchase a matrimonial home or funds to commence a business.  In the event that the relationship breaks down there is most often a debate as to how these funds are to be considered by the Family Court.  There is a fundamental difference.  The function of the Family Court in deciding the allocation of the assets is to firstly determine what are the assets (mainly the significant assets), their value and one deducts the liabilities of the parties to the de facto relationship or marriage to ascertain a value of the net assets. 

This is commonly referred to as the net pool, but more correctly should be referred to as the value of the net pool.  In those circumstances it is critical to ascertain and determine whether the moneys advanced by the parent of one, for example, in a recent case the wife, is a loan or gift.  A loan by a lender (even a parent) is an agreement by which the moneys lent are repaid on some terms.  On the other hand, moneys advanced by a parent of one of the parties to the marriage or de facto relationship is not repayable.  On many occasions it is unclear as to whether the moneys provided by the parent is a loan or a gift.  On many occasions the parties including the parent refer to the advance in some documents and discussions as a gift and in some discussions as a loan. 

Watson & Watson is experienced in considering all the evidence some of which is not easily ascertainable to determine assist the parties or Court to determine whether as a matter of fact there is an obligation to repay the funds advanced by the parent.  If a parent advances say $300,000 to assist one or both parties to the marriage or de facto relationship to purchase property excluding that possible liability the assets are $500,000, it is critical to determine whether the $300,000 is a loan or gift to determine the net pool.  The bigger the loan/gift and the lesser the other assets available, the more significant will be this issue. 

The Family Court in considering the allocation of the property and the value of the net pool between the parties considers varied matters which are set out in the Family Law Act.  However, in essence the Family Court considers all matters other than the reason and circumstances for the separation. 

At Watson & Watson we are experienced in considering these matters and providing an accurate assessment for the likely outcome of a contested hearing.  This is critical to enable an appropriate negotiation and hopefully an early settlement of the property issues between the parties.  It is critical that the longer the marriage the less significant is the financial contribution between the parties.  In a short marriage of approximately 3-5 years, the financial contributions are in many cases (but not all cases) the most significant matter to be considered in determining what is an appropriate division of the assets and property settlement. 

Please contact Richard Watson an experienced family lawyer to discuss all important matters, including property settlement and children matters once you find yourself in the position of a breakdown of marriage or de facto relationship.  Early consideration will assist you in your decisions through this often difficult time.

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