How do I stop my adult child's ex partner from unfairly benefiting from my gifts?
Some familiar situations to relationship property lawyers:
1. Parents gift their son or daughter a sum of money to help get them onto the property ladder. Maybe the parents pay the deposit on a house. Later that house becomes classified as the 'family home' of the son or daughter and their long-term partner because the long-term partner moved in a few years ago. The son or daughter separated from their partner and the now ex-partner claims half the value of the house. The ex-partner benefits from the parents' original gift, and what's more, the parents have to help their son or daughter 'buy out' the ex-partner from the family home.
2. A person separates from their long-term partner. The person's parents gave the couple $20,000.00 to renovate their kitchen. It was always intended the couple would pay this money back but nothing was put in writing. The now ex-partner is claiming this was always meant to be a gift so he or she doesn't owe $10,000.00 to the person's parents.
How do these situations come about? Here are some things to remember about how our law works:
1. Generally gifts or inheritances are classified as 'separate property' and don't form part of the relationship property pool that is divided equally on separation. However, if they are intermingled then they can become relationship property. So for instance, if a gift was used to pay off part of a joint mortgage.
2. A gift is irrevocable at law and without a paper trail it's difficult to prove something was actually a loan.
3. Informal agreements between partners or their family members don't usually stack up.
4. If people have been living together as a couple for at least three years they will come within the equal sharing regime of the Property (Relationships) Act 1976. Normally the family home will be divided equally regardless of unequal contributions. So one partner might get a windfall.
What can you do to prevent some of these situations? A gift or inheritance can be kept separate - e.g. in a separate bank account in your name only - but that isn't always practical. Potential legal devices include:
1. Parents can insist on a deed of acknowledgement of debt or other loan document which can be 'called in' on separation. A sum of money applied to the family home may become 'relationship debt' so both parties are liable to pay it back.
2. Couples can get a 'contracting out agreement' or 'pre-nup' which ensures certain property remains separate.
If you would like legal advice on relationship property or family trust matters, you can contact David Adams or Carolyn McLeod.