What happens to gifts in family law property settlements?

This is a question which frequently pops up when parties are separating and trying to work out who should get what in a property settlement.

When deciding on a property settlement division courts have to follow a five-step process which includes determining what the assets of the parties are, what their respective contributions to property pool are, and their future needs.

When considering contributions, a court will take into account gifts made by third parties to the separating couple.  The court follows a number of general principles in deciding who will retain the gift and who should get credit for it as a contribution to the property pool.  The court will consider what was the intention of the giver, whether they intended the gift to benefit one party or both parties.  This intention is given significant weight.

Where a gift is made to one party in their sole name, and that gift then is contributed to the assets of both parties during the relationships, then normally the gift is considered a contribution by that party.  If a party keeps a gift separate from the other assets of the parties, then the gift may not form part of the property pool and be retained by that person entirely.

If a gift is provided with the intention that it is to benefit both parties, then it is treated as an equal contribution by both.

In the case of Mabb & Mabb (2020) 60 Fam LR 299 the court had to decide whether a gift of 60 acres to the husband and wife by the husband’s parents was a contribution on his part alone or whether it was a equal contribution by both he and his wife.   The court found that because the husband’s parents had gifted the 60 acres to both the husband and the wife, the intention of the parents was that both parties will benefit from the gift.  In this case the court decided that the gift was an equal contribution to both the husband and wife.  Has the parents gifted the property solely to the husband, then the outcome of the case may have been significantly different.

If you are in a position where a gift has already been made, or one is about to be made, then obtaining legal advice can have a significant impact on the gift’s future importance in a family law property settlement. Call to speak to one of our experienced lawyers at ReesLaw about how to ensure that gifts from your family will benefit you in any potential property settlement.