Is it a gift or a loan?

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Is the money you received from family members treated as a gift or a loan in your property settlement? Hi, my name is Claire Aumuller. I’m a family lawyer here at Turnbull Hill Lawyers. In property settlement negotiations, we consider the assets and debts that should be included in the matrimonial asset pool. An issue which often arises is the classification of monies received by, say, a family member or a friend, namely, whether or not it would be treated as a gift that does not need to be repaid or a loan that does need to be repaid.

Case law tells us that when seeking to have a loan recognised, it would be more likely treated as a liability where there’s evidence of a written agreement, where the written agreement specifies the duration, where there’s evidence of repayments, or if there’s a mortgage or charge secured against property that was, say, purchased with those loaned monies. If the court decides that, yes, it is a loan, then that money will need to be repaid before all the other assets and debts are distributed between the parties in your property settlement. Essentially, if funds lent are a loan, they should be registered correctly, documented correctly, and repaid in a commercial fashion.

If you received money during your relationship and are thinking about separating, now would be a good time to contact us here at Turnbull Hill Lawyers for advice specific to your circumstances.