How are gifts treated on divorce/dissolution?

With the season of gift-giving hurtling towards us, we spare a thought for those who have given gifts that are thrust into the middle of a divorce or dissolution dispute as to whether it was a gift in the first place or whether it should be retained by the giver or the receiver.

As with a lot of family breakdown matters, it often depends on a variety of things.

Let’s have a look at gifts between the (un)happy couple to start with.

 Who keeps the engagement ring?

The biggie is often the engagement ring.

The law says “the gift of an engagement ring shall be presumed to be an absolute gift” – so no take-backs unless you can prove it was given with a condition that it would be returned if the marriage didn’t take place.

But what about once you are married, who owns it then?

This might depend on whether you had a pre-marital/civil partnership agreement that covered the ring. If you have an heirloom ring (think Princess of Wales) then it may be really sensible to spell out in an agreement what happens in the event of a divorce or dissolution. That way everyone is clear.

It might also depend on how valuable the ring is and what the other financial needs are – if it was very valuable, then selling it might end up being necessary to help fund homes for you (both) and any children or clear some debts.

People do get very hung up on the value of individual items but keep in mind that it will usually be the second-hand value of the item rather than what you paid for or insured it for. Even nice pieces of jewellery can have a surprisingly small value second hand.

However, it might be worth keeping in mind whether it’s financially worth arguing over who has it when you consider how much it will cost to get your lawyers and the court to help with that dispute.

Lastly on this point, do consider that if someone keeps the engagement ring – is it quite likely they will pass it down to future generations, so it stays in the family?

When you look at other types of gifts for birthdays and the big religious festivals or even the “just because” gifts, every case is different because it will probably depend on the value of the gift (certainly it’s second hand value) and what else there is in the marital “pot” of assets to be shared out. There’s a reasonable chance things you’ve bought for each other or received as a couple will be considered matrimonial in nature – i.e. available to be shared in some way but please keep it proportionate to the actual value of the item!

What happens if my parents have contributed to the deposit on my property?

Now, this is where it can get really sticky.

It is very common that the bank of mum and dad might help with a house purchase. It’s also really common that the commercial mortgage lender (i.e. your bank) asks mum and dad to complete a declaration that the money they are providing is a gift. This is so the bank is satisfied it’s going to get its money back and not be in competition with your parents for a share of the profits if the property is sold in the future.

There can also be a really blurry lines between these sums of money and whether they are gifts or loans.

The problems really arise when you are getting a divorce or dissolution. Your (or your ex’s) parents provide some of the deposit in to help you buy the house (possibly jointly with your ex too). They / you don’t want your ex to benefit from that sum of money and so they/you now say it was always intended to be a loan.

But was it a gift or a loan from a legal point of view?

Your ex will likely say it was clearly a gift or that, even if it was a loan, there was clearly no real intention that you have to repay it. They may even say the mortgage lender has a document declaring it to be a gift so it must be a gift.

That’s a question the court often encounters and has to decide. Sometimes the donors of the gift, such as your parents, might even have to join into the court case for their position to be determined about the nature of the gift or loan. It all gets very unpleasant and very expensive as you might imagine.

To the wary parents reading this, if you are considering providing (either by way of gift or a loan) your hard-earned money to your adult children (perhaps jointly with their partners) to assist with a big purchase, such as helping with the first step on the property ladder, or simply a cash boost, you may all benefit if you have a discussion with them about a pre-marital or post marital agreement. In the event of a future divorce or dissolution it could be the case that your child’s soon to be ex benefits from money that you had intended should only benefit your child.

Pre and post marital agreements can set out what happens to gifts or large sums of money within the marriage or civil partnership in the event of a divorce or dissolution. Whilst not the most easy or romantic conversation to have, thinking and planning in advance can help avoid expensive and stressful future legal arguments. If it’s clearly set out in writing and everyone signs up to that approach, that can make a big difference to the outcome should the very worst happen and the marriage or civil partnership come to an end.

For legal advice tailored to your particular situation, whether that’s before a marriage/partnership or during one or at the end of one, please contact Geldards’ family team.