How does the Court treat money given to me by my parents?
Money received from family members during the relationship may be considered a “contribution” to the relationship. Whether the money given to the parties or one of them during the relationship is a loan or a gift will often only become contentious once they have separated.
A common example is where there is a debt that is allegedly owed to a family member. It is often the case that upon separation, one party will claim that the ‘loan’ was intended as a gift, with no expectation of repayment, while the other party will claim that the ‘loan’ was genuine and required to be repaid.
Often times, loans from family members are:
- undocumented and legally unenforceable;
- made on unclear or uncertain terms; and
- given with little or no expectation of repayment.
In these circumstances, the Court will often disregard or discount the liability from the property pool, instead the Court will treat the loan as a financial contribution that has been made on behalf of the party whose relative provided the money. This does not mean that the loan is not ignored, as appropriate adjustments to the division of assets will be made in favour of that party. It would then be up to that party to repay the ‘loan’ on their own.
There are of course many circumstances in which the Court will include a loan from a family member. In order to ensure that a genuine family loan is included in the asset pool, it is imperative that appropriate evidence be put before the Court to prove that there is an expectation of repayment.
Evidence of this nature can include but is not limited to:
- a formal loan agreement and registered mortgage over property owned by the parties;
- evidence (in Affidavit form) of the lenders/borrowers as to the terms agreed, intentions and time-frames for repayment, etc;
- evidence of repayments being made;
- evidence of previous loans by the same family members being repaid by the parties.