Just Because We Love You

In June this year our Newsdesk covered the treatment of loans in the context of family law matters. In this report we look at the situation when a parent to a party to the marriage or de facto relationship provides a gift to their child with no expectation of reimbursement or repayment.

On occasion some parents have both the financial means and the requisite desire to assist their children with funds to purchase or assist with the purchase of a first home, provide renovation costs, sums of cash and other assets of value. Is the gift considered to be a gift to the child of the donating parent or to the child and their partner? What was the parent's intention and what happens when their child separates from their partner? Would the parent have given the money or asset to their child's former partner but for the fact they were the partner of their child?

The principle enunciated in the case of Kessey (1994) is that:

A contribution by a parent to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child (emphasis added).

In a recent case Kern and Kern [2014] FCCA 1108 the Federal Circuit Court of Australia reaffirmed the principle enunciated in Kessey. In Kern and Kern the wife was gifted a block of land and a cash sum by her parents. Despite the husband arguing that he made a contribution to the land, the Court found the contribution was negligible and regarded the land and the cash to be a gift by the wife's parents for the wife's benefit.

Having determined the gift was for the wife's benefit and therefore a contribution made by or on behalf of the wife how did the court have regard to that gift? But for the gift, there were no distinguishing factors between the parties. The asset pool as at the date of hearing was approximately $900,000. The value of the block of land and cash provided to the wife by her parents was $470,000, more than 50% of the current asset pool.

Ultimately the Court determined the wife was entitled to 70% of the pool and the husband 30%, that is a disparity of some 40%.