Gifts Or Loans From Parents – Do They Have An Interest In The Property?
Advancement of Monies
Have you assisted with the purchase of a home for your child(ren) who have now separated or divorced? Or have you separated, and your home has been purchased with the assistance of a family member?
You might wonder how the Family Law Courts treat an advancement of monies and whether this advancement of funds will be returned.
How the Family Court treats these advancements depends on how the Court determines these funds were received. There are three common scenarios: –
- The funds were advanced as a “Loan”:-
If the money was advanced by way of a loan, the Court could consider this advancement as a liability when determining the net property pool available for distribution. The Court needs to be satisfied that the loan actually exists, and that the monies are required to be repaid.
The Court can make an allowance for a particular liability if it is appropriate to do so and there is sufficient certainty that the loan is likely to be enforced. In other cases, the court may take the view that the liability ought to be disregarded in the interests of justice and equity of the parties.
However, although the Court may disregard the loan as a liability in the balance sheet, the Court cannot disregard the liability entirely and the advance may be a factor affecting the party’s available financial resources.
- The funds were a “Gift”:-
If a party receives the moneys by way of a gift, then the gift is taken into account when assessing that party’s contribution to the asset pool. The significance of this contribution will depend on when the gift was received and how it was applied to the asset pool.
- The funds created an “Equitable Interest”:-
If the monies were advanced by a third party for the purpose of that third party retaining an interest in the property, then the Court can consider that these monies are held on trust by the party (who legally owns the property) for the benefit of the third party who advanced the monies (commonly the parents). This third party (the parents) may hold an equitable interest in the property which the Court may need to exclude and usually pay back, when altering the parties’ interests in the property pool.
The Court may find a trust exists. Specialist family law advice should be obtained as to the appropriate category of trust to ensure your claim is successful. The Court may find the trust is an Express Trust, an Implied Trust, or a Constructive Trust.
- Express Trust
The essential criteria for finding an express trust is that the parties intended to create the trust to deal with a specific subject matter for a specific purpose for the benefit of someone. This is usually documented in writing by way of a trust deed.
- Resulting or Implied Trust
Where there is no document, the Court can look to the circumstances surrounding the advancement and assess whether the third party intended the advancement of money to be for a specific purpose, and not for the benefit of the party to the relationship.
For example, if a spouse’s parents (third party) advanced money towards the purchase of a property for the spouse, then they are required to rebut the presumption that this advancement of monies was a gift and was not for the purpose of the third party obtaining a beneficial interest in the property.
- Constructive Trust
In the context of purchasing a property, a constructive trust arises if:
- the parties have a common intention between the parties that the third party who has advanced the moneys in the purchase of the parties’ property would have a beneficial interest in the property; or
- notwithstanding the actual or presumed intention of the parties, it would be considered unconscionable for the spouse/party, as a legal owner of the property, to deny the person who has advanced the money.
In the matter of Giles & Giles & Anor  FCCA 194, Dorter Family Lawyers and Mediators were successful in establishing a resulting trust in favour of the husband’s father. The husband’s father advanced moneys to the husband equivalent to 50% of the purchase price of the former matrimonial home. The Court considered contemporaneous evidence in finding that the presumption of advancement was rebutted, and that the monies were never intended to be advanced as a gift. An order was made for the Husband’s father to be repaid 50% of the sale proceeds from the sale of the former matrimonial home.
Have you or your spouse been advanced money from parents?
To obtain specialist family law advice, contact our expert family lawyers at Dorter Family Lawyers and Mediators who specialise in all areas of family law, including trusts, and they will assist you. Please contact us on (02) 9929-8840.