It’s common for modern entrants into the property market to have had some assistance getting there. You might have heard of the term ‘the Bank of Mum and Dad’ to refer to when parents or family members have assisted someone in helping with a deposit on a property. But how does this new type of Bank stack up when it comes to a separation with your partner?
Family law has long adopted a presumption about money coming from family members, called the presumption of advancement. In brief, that presumption says that where there is an intra-family transfer (a payment from your mother to you for example), then that is presumed to be a gift. If there is evidence to the contrary, then the presumption can be rebutted.
What does it take to rebut the presumption of advancement? There are competing schools of thought and arguments about this. One line of reasoning says that if you intended something to be a loan, then you would have all the regular features of a loan – a contract entered into before the money was transferred, terms of repayment, interest payable, the ability for whoever loaned the money to ‘call in’ the debt, and even registering an interest by way of a charge or sometimes a mortgage.
However another line of reasoning, advanced particularly in the Supreme Court of NSW, has said that family members are simply unlikely to adopt such formalities in their intra-family relations, but that this shouldn’t stop a Court taking a view that money transferred was a loan, not a gift. That is, that the level of formality about a loan in a family is going to be lower than if the Commonwealth Bank, for example, loans you some money.
These questions turn on evidence, and your conduct with the money, particularly before you separated. If you separate, and suddenly start treating money as being a loan and paying interest, it certainly looks suspicious if that’s not what was happening before. Patterns of conduct are important, as are formal documents being prepared at the time of the loan, particularly with documents showing that a partner or former partner knew exactly what was going on.
It’s easy to say all this in hindsight, but our lawyers are experts at asking you the right questions to help find the evidence that you might need to argue a loan – and if you cannot, giving you the right advice early to help you avoid going down the wrong path.