Parting may be a sweet sorry for William Shakespeare but if neither of you are in Romeo and Juliet mode anymore, what happens to the gifts you received from each other?
What happens to the rings and the jewellery?
What happens to that lovely cash present Aunty Doris gave both or one of you last year? 
Dividing marital assets at the end of a relationship can be quite straightforward, but how do the courts look at gifts and divorce?

It is not unusual for parents to give their adult children significant gifts to help them get ahead in the property market, to go on a holiday or perhaps to assist with the raising of their children. This is all perfectly standard and legal, and many people are lucky enough to receive monetary gifts from their retired parents.

A problem arises when the adult child receiving a gift of money is in a relationship and this relationship later ends.

Does the other spouse have a right to the money that was given as a gift?

How can a person hold onto their gifts in a property settlement?

Will the gift be counted as part of the divisible pool of marital assets?

Property settlements do not follow any specific formula and many different points come into consideration.

Here are some of the most important elements to consider when looking at gifts in property settlements:

Assessing Contributions In A Property Settlement

A property settlement involves identifying a couple’s – whether de facto or married – assets, resources and liabilities and working out their total value. This typically involves looking at bank accounts, superannuation, property, mortgages, loans and sometimes other physical assets such as cars.

Both parties’ contributions to the marriage are evaluated. Contributions can be classified as direct and indirect, financial and non-financial.

Non-financial contributions include caring for children and maintaining the household. These are viewed as equally valuable as earning an income to provide for the relationship and family.

The court will divide the assets according to the contributions made by each party to the relationship.

However, adjustments may be necessary to account for a difference in the spouses’ current or future earning capacities.

One spouse, for example, may be the primary carer of the couple’s children and therefore have a limited capacity to work.

A person may also be less able to work due to illness, age or other reasons.

Any gift received by a party to the marriage will most likely to be counted as a financial contribution they made to the relationship, even the often given bloody wedding toaster.

If the gift was received before the start of the relationship, it will be categorised as an initial contribution.

As this increases the contributions the gift recipient made to the marriage or de facto relationship, their entitlements in the property settlement are likely to increase as well.

But be careful – there are other factors that affect the division of assets, and every case is different and is considered on its own.

Who Received The Gift?

Because a property settlement is about assessing contributions to the relationship, an important question is who was intended as the beneficiary of the gift.

If one spouse in the relationship receives a substantial monetary gift, it must be determined whether the gift was meant for their sole benefit or for the benefit of the other spouse as well.

Unless it is clear that the gift was meant for the equal benefit of both people in the relationship, the court will usually consider the gift as received by only one party. This will then affect the assessment of contributions as well as the adjustments made in the property settlement.

However, the question of who the gift belongs to holds less weight the longer the couple were married or in a relationship.

When dividing the property and assets following the breakdown of a shorter marriage or de facto relationship, such as one lasting for five years, it is more likely that any monetary gift received by either party will be kept out of the divisible asset pool, remaining the property of the gift recipient.

For longer relationships lasting at least ten or fifteen years, regarding gifts in property settlements, it is less relevant which side of the family the gift came from. Here, the court is more likely to treat both spouses as equally entitled to the money.

Determining who receives gifts in property settlements or whether a gift is divided equally depends on the assessment of contributions and each party’s earning capacity.

Protection of Gifts When Getting A Divorce

If you are the person giving a significant gift to your adult child, the possibility of their relationship ending in the future and their spouse claiming the money can be a legitimate cause for concern.

There are some strategies you can use to protect against this possibility, even if you do not think it very likely, and to keep the gift in your child’s possession in the event of a relationship breakdown.

One way to safeguard any gifts in property settlements is by recording your gift as a loan to make it technically repayable to yourself.

Loans are treated differently in property settlements from outright assets.

The court will not consider it as part of the divisible pool of marital assets as it is money that needs to be repaid.

If the court decides to have the loan repaid using the resources in the asset pool, following the finalisation of the divorce you are able to regift the money to your child.

The second way to ensure a gift remains belonging to its initial recipient is to draw up a binding financial agreement, or a prenuptial agreement.

Here, both spouses acknowledge the existence of the gift as belonging to one spouse, and acknowledge that the gift is not divisible with the other spouse in the event of relationship breakdown. A binding financial agreement is a legal document, witnessed and signed by an authorised person such as a Justice of the Peace.

The Engagement Ring

Parents are not the only people who may be concerned about the division of gifts in property settlements.

When a relationship breaks down, the spouses can have their mind on a very significant and symbolic gift made from one to the other, the engagement ring. No matter how ugly the ring, it is always held close at heart.

Australian couples now marry later than ever before, the engagement period lasts longer and over 75 per cent of couples move in together before getting married. Because the ring is generally a very expensive purchase, exactly who it belongs to – the gift recipient or the gift-giver – becomes a very important question.

Up until around the mid-20^th Century, family courts typically considered the ring as belonging to the person who gave it to the other spouse. The thinking was that the gift was given in contemplation of marriage, but the marriage never happened.

Today, the law varies on who owns the engagement ring, and the court’s decision often depends on factors including the value of the ring itself, who gave it to whom and whether the couple cohabited.

For many couples, the engagement ring can be a significant purchase.

Engagement rings are often expensive pieces of jewellery, but the value attributed to gifts in property settlements is based on their current second-hand purchase price rather than their value at the initial time of purchase.

Therefore, engagement rings may diminish in value when considered as part of the property settlement.

If the judge finds the engagement ring to not be of great value, and therefore not worth any kind of division or transfer of ownership, they will then usually allow the person who received the ring to keep it.

However, engagement rings with a significantly higher second-hand value, and therefore more likely to be causing conflict in the property settlement, will generally be counted as part of the asset pool to be divided between the spouses.

Considering the engagement ring as a gift given with the promise or expectation of marriage may affect a court’s decision on who retains ownership of it following a break-up.

The court’s decision may depend on who gave the ring and who left the relationship.

If the person who was given the ring refused to fulfil the conditions of the gift – marriage – then they may have to return the ring.

If the person who gave the ring refused to follow through with the promise of getting married, they may have no claim to the ring in the property settlement.

All this is based on the assumption that the couple in question cohabited as a de facto couple while they were engaged.

To be entitled to a de facto property settlement, which does not differ from the property settlement of a married couple when they divorce, a couple must be living together on a genuine domestic basis, not related to each other and not legally married.

The majority of Australian couples live together before marrying, making the ending of an engagement and the ending of a marriage a similar matter before the family court and raising the same issues regarding gifts in property settlements.

Don’t forget to check out all our great family law info HERE.
HEY…
And if you’re sick of wasting money on a lawyer, or just want to self represent, we have a great team of lawyers who can help you with your documents and forms and guide you through the court process at low cost.
Avoid those $400+ an hour lawyers, they’re just not worth it!


Contact us via Facebook messenger, or drop our fabulous Paralegal Abbey a line at abbey@TheLegalEagle.com.au 

When a relationship ends one of the most common initial reactions is to want to sell, burn or otherwise dispose of your former partner’s belongings or things you had purchased together. Whilst there are numerous articles in magazines and online about the psychological and emotional benefits of culling your ex’s stuff, few mention the implications this may have on your family law matters.

What is considered property?
When dividing assets, the Family Court applies a four step process which starts with ascertaining the value of the asset pool available for division. Property is defined by section 4 of the Family Law Act 1975 as:

“Property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”

Whilst this of course includes more obvious items such as real estate, cars, superannuation and bank accounts it also includes various personal belongings such as furniture, artworks, jewellery or collectibles. Essentially, determining an asset pool includes everything that you are your partner own jointly or as individuals.

This can be further complicated when considering matters such as inheritance, pension entitlements and accrued long service leave which may be considered by the Family Court to be a financial resource. It is important to distinguish between what is property and what is a financial resource as this may impact the overall division of assets.

When can I get rid of his/her stuff?
The general position is that no items should be sold, encumbered, damaged or in any other way disposed of until property matters are resolved on a final basis. You may have seen the recent “Art of Divorce” auction held by Russell Crowe in Sydney where he made approximately $3.7 million selling off various artworks, jewellery and collectibles accumulated through his career.

As tempting as it may be to auction off or throw out your ex’s belongings, this ought to be done only following a final agreement, which we recommend is documented by way of formal Family Court Orders to ensure enforceability and finality. Attempting to sell, dispose of or otherwise damage goods involved in family law matter may give rise to urgent proceedings being commenced in the Family Court seeking an injunction against one party from doing.
Find what happens with the kids when you divorce HERE
AND
Find out what happens if the kids DON’T want to be with one of you HERE
We have tons of resources on The Eagle so please feel free to check them all out!

Corynne Cirilli from Town and Country magazine recently asked some high profile New York divorce lawyers what the First Lady would be entitled to if their relationship ended. Trump is famous for demanding pre-nups from his former wives but Melania may be in the box seat when it comes to challenging hers.

Eavesdrop on a steakhouse lunch between divorce attorneys and you’re likely to hear them engaging in their current favorite sport: speculating on the marital arrangement between Donald and Melania Trump. “We love talking about it,” one recently told me. “What’s in the pre-nup? Did it get renegotiated during the campaign, or after he won? How would a split play out?… It’s irresistible conversational fodder.”

During his two previous divorces, Trump stuck mostly to the pre-nup; although Ivana Trump contested it, she reportedly got $14 million, a New York apartment, a Connecticut mansion, and Mar-a-Lago once a year, as well as $650,000 annually for alimony and child support.
[Below- Trump and first wife Ivana]

Marla Maples contested hers, too, and is said to have been awarded around $2 million.

But now that the stakes are higher, we asked a few of the country’s top matrimonial lawyers for their take on what could happen if the first couple were to split.

T&C: HOW IS THE TRUMP PRENUPTIAL AGREEMENT MOST LIKELY STRUCTURED?
Thomas Kretchmar, associate, Chemtob Moss & Forman: I can’t speak to them directly, but in a New York high-net-worth marriage, a pre-nup is primarily designed to protect what is already owned prior to the marriage, versus things that may be accumulated moving forward.

Peter Stambleck, partner, Aronson Mayefsky & Sloan: What I would have recommended to them is a title controls pre-nup. It makes it very clear that, in the event of divorce, everything in his name will be his and everything in her name will be hers.
What would his main concerns have been when structuring the pre-nup?

Stambleck: Billionaires have complicated asset structures. They have shell companies, LLCs, investments in other companies, and it’s very, very complicated. One main purpose of a pre-nup is to avoid having to share in that, but also to avoid the headache that goes into producing all the documents and having accountants come in and look at all of it. Theoretically, that’s what could happen in the absence of a pre-nup.

T&C: HOW WOULD THEY DIVIDE ASSETS- REAL ESTATE, ART, OR JEWELLERY?
Jacqueline Newman, managing partner, Berkman Bottger Newman & Rodd: My guess is real estate will be involved. Obviously, he has the apartment in the city that was his before the marriage, and I can pretty much guarantee he’s not giving it to her. But in situations where I’ve dealt with very high-income, high-asset cases, the moneyed spouse will purchase an apartment for the non-moneyed spouse and the children to live in.

Stambleck: And usually any personal property that directly relates to that person stays with him or her. There’s no question, for instance, that her jewellery will be hers, not his.

T&C: WHAT ABOUT THEIR 11-YEAR-OLD SON, BARRON?
Newman: It’s handled by the courts. Given what I’ve read in the tabloids, it doesn’t seem as if there’s going to be much question as to who the primary caretaker is. My guess is that she would get primary custodial rights and he would get access whenever he happens to be in town.

How much money is she likely to get?
Newman: In this situation, if she has $50 million, she can afford to buy something. But $50 million, while it’s definitely a lot of money, in New York City, for what she’s used to, she wouldn’t be able to replicate what she has now. He probably had a good sense of what kind of lifestyle they’d be living, so I would imagine the payout would be fairly generous.

T&C: WOULD HE HAVE AGREED TO MAINTAIN HER LIFESTYLE?
Stambleck: Can he put in a pre-nup that she’ll have access to the Mar-a-Lago residence for a month in December? Yes, you can literally put anything in the pre-nup. He could say that on 72-hour notice she’ll have use of the plane.

T&C: COULD SHE NOW CHALLENGE THE PRENUP TO ANGLE FOR MORE?
Stambleck: It’s unusual. One of the main reasons to enter into a pre-nup is that, in addition to protecting the wealth, you’re also trying to make it clean—and stay out of the press. In the state of New York, it’s a very high hurdle to try to get a prenuptial agreement overturned.

Kretchmar: An interesting issue with prenups in New York City, which is within a jurisdiction where it’s really very difficult to invalidate a properly prepared, properly entered-into prenuptial agreement, is that it is not unusual to see the non-moneyed spouse still getting a little more in the settlement than the pre-nup entitled him or her to. The non-moneyed spouse may believe that just the idea of challenging the agreement will strike enough fear, stress, and overall agitation into the moneyed spouse—in terms of not wanting to be in the courts, not wanting to be in the gossip pages— that he or she may be willing to pay a little more just to make it go away.

T&C: WHEN TRUMP RAN FOR AND THEN BECAME PRESIDENT, MELANIA’S SITUATION CHANGED. DOESN’T SHE HAVE A LOT MORE LEVERAGE NOW THAT IT’S SO IMPORTANT THAT THE MARRIAGE DOESN’T FALL APART? MIGHT SHE HAVE RENEGOTIATED THE PRENUP?
Kretchmar: Without speculating on any particular case, it’s certainly true that spouses can, during their marriage, modify the terms of an existing prenuptial agreement in response to a material event. is is done in a document called a postnuptial agreement. Sometimes post-nups are used as a stopgap to an eventual divorce. Other times they are genuinely just a revision or refinement of existing rights in light of a change in the spouses’ circumstances.

Newman: It’s very hard to overturn a prenup in New York. The only thing that she could possibly try to argue—and I’m not sure it would succeed—is that when she entered into the agreement she didn’t anticipate he would be president (assuming it was not discussed as a possibility at that time). Therefore, in terms of any spousal support waiver, it would not be fair and reasonable for her to waive spousal support at this time, because there are now more anticipated expenses that she will incur being first lady, especially if she divorces him when he is in office.

This story appeared in the February 2018 issue of Town & Country.