Gifting property before divorce – what are the rules?

We have discussed in previous articles that there is an obligation on both parties to disclose assets fully and honestly during a divorce. But what about transfers or gifts of property received before the divorce? What happens here? Read on to find out.

If you have concerns about your finances you feel you need legal advice, contact specialist family lawyer Helen Miller of Stowe Family Law. She is an exceptionally skilled family law expert with over 20 years’ experience, and Managing Partner at this well known specialist family law firm.

Gifts can come in a variety of guises. Below are some of the more common examples.

Gifts from third parties

Perhaps you or your spouse received a gift from your parents; this could be for your sole use or a joint gift for you as a couple. Such a gift could include a property transfer, a share in a property, or be a contribution towards a deposit on the matrimonial home.

Typically, gifts from parents or other family members to an individual spouse will become matrimonial property. Gifts made to the couple jointly will almost always be considered matrimonial property.

Inheritance

How inheritance is treated during a divorce often hinges on the individual circumstances of the case. Assets inherited by one party are often treated differently from other matrimonial assets. But whether inherited money or property will be added to the matrimonial pot will ultimately depend on several factors, including things such as the length of the marriage, when the inheritance was received, how it was treated, and whether it was used as part of shared finances. Please read our fuller article here which goes into inheritance and divorce in greater depth.

Loans that become gifts

Sometimes, instead of gifting money to a couple, parents will offer informal loans which may ultimately end up becoming gifts. In legal circles, these are generally referred to as “hidden” or “soft” debts. This is because they don’t tend to have the ability to be formally demanded if payments are not made.

But when can a loan be considered a gift? This can be difficult to determine, but if time has elapsed since the loan was given and payments have not been made or demanded, then it is more likely to be considered a gift.

Naturally, the spouse whose parents have provided the money will be keen to show that the gift was a loan, whilst the other spouse may be surprised to learn that earlier family support is being clawed back. Questions such as why repayment is required now when during the course of the marriage repayment was not made or pursued are likely to be relevant in these types of cases.

If a spouse wants to rely on the existence of such a loan, then it is important, at the outset, the make sure there is a formal loan agreement drawn up, or some other form of documentation that proves it is a loan.

Gifts between spouses

Over the course of a relationship, from inception to divorce, spouses will probably have bought each other many gifts over the years. Some of them can be substantially valuable, such as the engagement ring, jewellery, cars, or other property. Generally speaking, any asset acquired during the course of the marriage will be added to the overall matrimonial pot for division. Please take a look at our previous article here for more information on how gifts between spouses, such as an engagement ring, are treated during divorce.

Can my ex claim against any gifts I’ve received?

An ex could make a claim against any gifts or inheritance received by their partner, and in the absence of a consent order ending all claims in the future, in some cases many years after divorce. Crucial to any matter will be evidence. The main feature of any divorce finances case is a fair and reasonable division, so if this cannot be achieved using the available assets, then adding the gift may be an option.