Gifts from par­ents – re­la­tion­ship prop­erty

Kapi-Mana News - - WHAT’S ON - ALAN KNOWSLEY

Your long-held fam­ily prop­erty can be lost un­less steps are taken to pro­tect it from be­ing re­la­tion­ship prop­erty.

Gifts from par­ents may be­come re­la­tion­ship prop­erty and be sub­ject to equal shar­ing if the re­la­tion­ship breaks down.

In a Fam­ily Court de­ci­sion, a home bought by par­ents as a gift to their child was open to a suc­cess­ful re­la­tion­ship prop­erty chal­lenge from that child’s de facto part­ner on the ba­sis it was a ‘‘fam­ily home’’ and there­fore sub­ject to equal di­vi­sion.

Un­der the Prop­erty (Re­la­tion­ships) Act, the ‘‘fam­ily home’’ is usu­ally con­sid­ered re­la­tion­ship prop­erty.

That means if the re­la­tion­ship is of three years or more (a de facto re­la­tion­ship, civil union or mar­riage), the start­ing point on sep­a­ra­tion is that all re­la­tion­ship prop­erty, in­clud­ing the fam­ily home, is di­vided equally be­tween the par­ties to the re­la­tion­ship.

This po­si­tion ap­plies re­gard­less of how or when the home was ac­quired. To be a ‘‘fam­ily home’’, a prop­erty sim­ply needs to be used as one and owned by one or both of the par­ties.

That may be prob­lem­atic for par­ents who gift prop­erty to a child and later find their child is in a re­la­tion­ship that would in­voke the re­la­tion­ship prop­erty regime (for ex­am­ple, a de facto re­la­tion­ship).

To pro­tect against this pos­si­bil­ity, many have used fam­ily trusts as a form of pro­tec­tion. How­ever, re­cent cases have shown that in­creas­ingly this may not be enough to pre­vent a claim be­ing made.

Where fam­ily trusts are used to pro­tect prop­erty, sev­eral fac­tors can ef­fect whether the trust pro­vides the in­tended as­set pro­tec­tion.

In par­tic­u­lar, it is im­por­tant for the trust deed to be care­fully drafted and for the trust to be ad­min­is­tered prop­erly over time.

If that is not the case, the trust may not be pro­vid­ing the pro­tec­tion you think it is.

Even if you leave the prop­erty as a gift in your will, the house will not be pro­tected from a re­la­tion­ship prop­erty claim. Usu­ally in­her­i­tances can re­main sep­a­rate prop­erty if they are kept sep­a­rate.

How­ever, a house will be­come re­la­tion­ship prop­erty if it is used as the fam­ily home. It loses its pro­tec­tion as an in­her­i­tance and be­comes sub­ject to the equal split pro­vi­sions.

Your long-held fam­ily prop­erty can be lost un­less steps are taken to pro­tect it from be­ing re­la­tion­ship prop­erty.

Though there are many ways to pro­tect prop­erty, in many cases the best way to pro­tect a prop­erty against any claim from a part­ner is to en­cour­age your son or daugh­ter to en­ter into a Contracting Out Agree­ment with their part­ner.

That will clar­ify that the par­ties have agreed that the gen­eral rules set out in re­la­tion­ship prop­erty leg­is­la­tion will not ap­ply on sep­a­ra­tion.

That might be only in re­la­tion to the home they live in, or in re­la­tion to other prop­erty they own as well. Such an agree­ment can record that some other agreed di­vi­sion will ap­ply in the event of sep­a­ra­tion.

To be bind­ing, a Contracting Out Agree­ment will need to be in writ­ing, signed, with each part­ner’s sig­na­ture wit­nessed by their in­de­pen­dent solic­i­tor (dif­fer­ent lawyer from a dif­fer­ent firm), and their in­de­pen­dent solic­i­tor cer­ti­fy­ing that they have ad­vised that party on the full im­pli­ca­tions of the agree­ment.

The cer­ti­fi­ca­tion process aims to en­sure that par­ties en­ter­ing into such agree­ments do so on an in­formed ba­sis.


The fam­ily home can be the cen­tre of a fi­nan­cial dis­pute af­ter a re­la­tion­ship breakup.

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