Gifts received during the marriage can be considered part of the matrimonial property pool, their treatment in the final settlement can vary based on factors like the giver’s intention, the timing of the gift, or any written agreement in place.
In this article, we will answer how the facility is treated when the marriage ends.
What is a Gift in Divorce?
In Australia’s divorce context, a “gift” typically refers to an asset or property that one party receives without expecting repayment or exchange. This can be a gift from a third party, such as family or friends, or from one spouse to another.
Characterising property as a gift is crucial when determining its treatment in a property settlement. Typically, gifts might include money, jewellery, real estate, or other valuables.
However, it’s essential to differentiate between gifts and assets acquired during the marriage through joint effort or purchase.
How Do Australian Courts Treat Gifts Given By One Spouse To Another During The Marriage?
In Australian family law, gifts given by one spouse to another during the marriage are generally considered part of the matrimonial property pool.
If the couple divorces or separates, the court will consider all assets, including gifts, to ensure a just and equitable distribution. Gifts received during the marriage, whether from a spouse or someone outside the marriage, can be considered part of the marital property or community property. If deemed marital property, they are subject to division during the divorce process.
However, the significance and intent of the gift, its value, and the circumstances surrounding its acquisition can influence its treatment in property settlements.
While gifts between spouses can be seen as joint property, other factors like financial contributions, non-financial contributions, and future needs of both parties will also be considered during property division.
If you are unsure whether a gift is owned by you alone or is considered a conjugal property, this article will help you figure out the answer.
Are Gifts From Parents Marital Property?
Whether gifts from parents are considered marital property largely depends on the jurisdiction and the specific circumstances surrounding the gift. Here’s a general overview:
- Intent of the Giver: If parents intend a gift to be for one child exclusively, and this gift is documented or proven, the gift may be considered separate property. However, if the intention was for the gift to benefit both spouses (e.g., a down payment for a house they purchase together), it may be treated as marital property.
- Commingling of Assets: Even if a gift was intended for one spouse if the funds or property are mixed or “commingled” with marital funds or used for the benefit of both spouses, they might be transformed into marital property. For example, if parents give money to one spouse, which is then used to renovate a home jointly owned by the couple, the gift could become marital property.
- Documentation: Keeping clear records and documentation regarding the gift’s origin, intent, and use can help clarify its status in the event of a divorce. A gift letter or some form of written indication of the purpose behind the gift can be handy.
- Prenuptial or Postnuptial Agreements: If the couple has a prenuptial or postnuptial agreement, the treatment of gifts, inheritances, and other assets might be specified in that agreement.
- Jurisdictional Variations: Different jurisdictions have different rules regarding marital and separate property. Some jurisdictions operate on a community property system, while others use an equitable distribution system. The classification of gifts from parents can vary depending on local laws and precedents.
- Transformative Actions: If a gift given to one spouse is later placed in both names (e.g., a house or a car), this can transform the gift into marital property.
How to Protect Gifts From Divorce?
Protecting gifts from being divided or claimed in a divorce is a concern for many individuals. You can employ several strategies and precautions to help ensure that gifts remain separate property. Here’s a guide to help:
- Prenuptial and Postnuptial Agreements: These are contracts entered before or after marriage, specifying which assets remain separate property and which are considered marital. They can explicitly state that gifts (whether received before or during the marriage) remain the receiving spouse’s particular property.
- Keep Clear Documentation: If you receive a gift during your marriage, obtain and keep documentation proving its origin and the giver’s intent. This could be a letter from the giver, a card, or any other written confirmation indicating that the gift was meant solely for you.
- Avoid Commingling: One of the most common ways gifts become marital property is through commingling. This means mixing the gift with marital funds or assets. For example, if you receive money as a gift and deposit it into a joint bank account, it becomes difficult to distinguish it from marital funds. Instead, consider keeping it in a separate account under your name.
- Do Not Transform Gifts: If you receive a gift, like a piece of property, avoid putting it in both spouses’ names or using marital funds to improve or maintain it. Doing so might transform it into marital property.
- Gifts Used Towards Marital Assets: If you use a gift, such as money from parents, towards a marital asset like a jointly owned home, it may become part of the marital property. If you intend to separate such a gift, avoid using it towards joint assets.
- Regular Accounting: Periodically review and document the status of your separate property, including any gifts. This will help ensure you have a clear record of the property’s status, especially if it appreciates or earns income.
- Establish a Trust: Sometimes, you can protect gifts by placing them in a trust. A trust can specify how the assets are to be managed and for whose benefit, protecting from claims in a divorce.
- Understand Local Laws: The classification and treatment of gifts and other assets in divorce vary significantly based on jurisdiction. Familiarise yourself with local laws and consult with our property lawyers.
Also read: Taking Back A Gift Law Australia
What To Do With Wedding Ring After Divorce?
After a divorce, deciding what to do with a wedding ring is a very personal and emotional decision that depends on a variety of factors.
Some individuals opt to keep the ring because of its sentimental value or with the intention of passing it down as a family heirloom.
Others find comfort in repurposing it, transforming the ring into a new piece of jewellery, like a necklace or a different ring altogether.
For those seeking financial or emotional closure, selling the ring can be beneficial, especially with the emergence of specialty retailers and online platforms dedicated to buying and selling pre-owned rings.
If the divorce occurs shortly after the engagement or wedding, returning the ring might be considered, particularly if it holds significant meaning or history on the partner’s side.
For those uncertain about the immediate future of the ring, storing it safely until a clear decision emerges is a practical choice.
Alternatively, gifting it to a loved one or donating it to a charity are actions some deem fitting. A few even choose symbolic gestures of parting, like casting the ring into a body of water or burying it, to symbolise letting go.
However, before making a final decision, it’s crucial to understand any legal implications. In certain jurisdictions, the ring, often viewed as a gift, may need to be returned or factored into property divisions.
Are Gifts Included In Divorce Settlements?
Unsure if gifts factor into your divorce settlement? It’s essential to get informed and protect your assets. Justice Family Lawyers specialize in guiding individuals like you through the complexities of property division. Don’t be left in the dark about your rights and entitlements. Contact Justice Family Lawyers today and ensure you’re making informed decisions for your future.
Principal of Justice Family Lawyers, Hayder specialises in complex parenting and property family law matters. He is based in Sydney and holds a Bachelor of Law and Bachelor of Communications from UTS.
