By Edwin Morrison of K3 Legal in Auckland
Gifting Money - Photo by Nathan Dumlao on Unsplash

K3 Legal acts for a number of couples going through separation and time and time again we see that one of the couples’ parents have seen gifting money to their son (as in this example) or daughter as a way to help them buy a property.

The son lives with a spouse (not necessarily a wife), in the house which his parents largely paid for. When the couple separates, the spouse may want half of the house which includes the money given by the parents.

Gifting To Children - Photo by Avi Naim on Unsplash

Seeing gifted money as lending to family

Usually, it is at this point that parents may claim that the sum of money was a loan in order to ensure this money stays with their child as intended.

But because of the nature of the relationship between parent and child, it is difficult to disprove whether it was a loan or gift, unless the sum was genuinely a loan.

In New Zealand law there is a presumption that the money given was a gift.

This means that if your children get married, or are in a relationship for more than three years, but get divorced or separated, the spouse is entitled to half of your child’s assets, including the sum of money given by you to purchase the property.

There are other more complex rules surrounding relationship property but the rule of equal sharing between spouses or partners is the basic starting point.

How to protect money gifted to children

This happens so often, and the usual result is that the ex-spouse ends up getting half of the sum given by you to your child.

Gifting Money to Family Members  -  Photo by Minh Pham on Unsplash

To avoid this result, when you decide to help your children gain a foothold in the property market by giving them a financial boost, you should go to a lawyer before transferring the money and document a proper loan which has to be repaid.

That way if there is a separation you can get the full amount back afterwards, then re-lend the money if you choose to, without the ex receiving a dime.

This may not stop the argument in Court but at least it will give you a much better chance of winning.

Always get legal advice when buying a house

Wise Up NZ Awarded Most Reputable Property Advice Hub NZ 2021

Page updated April 5, 2022 by Trish Willis | Member of Property Institute of NZ (IPAC)

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Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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