Retirement Couple

My Parents Lent Me Money – How Can I Protect Them During My Separation?

It is extremely common for parents to provide financial assistance to their children, with this assistance often coming about either prior to, or following a marriage.  Given the often exorbitant cost of housing, especially within the Sydney property market, this parental decision to allocate funds to children in order for them to purchase property is becoming more and more prevalent.

When parties embark upon a marriage, and in turn, receive assistance from their parents, it is rare for them to put thought towards just how their parents might be protected in the event of the marriage breaking down.  The recent case of Zubcic & Zubcic and Ors [2018] FamCA 129 sheds some light on what can happen if these difficulties are not anticipated at the outset of a marriage.  

In this particular case, in order to assist their son in purchasing a franchise, Mr Zubcic’s Mother and Father had transferred their share in a property to him and his then Wife.  No money was ever paid to the parents in return for that transfer.

The property that had been transferred from Mr Zubcic’s parents to Mr Zubcic and his Wife was eventually sold, with the proceeds of sale being used to purchase another property.  Again, Mr Zubcic’s parents received no financial return upon the property being sold.  

In 2006, Mr Zubcic’s mother died.  Another property was then purchased for Mr Zubcic’s father, which was funded by Mr Zubcic and his Wife, and at the time of separation, remained in the asset pool (albeit in Mr Zubcic’s Father’s name).  

The property which had initially been purchased using the proceeds of sale of the transferred property was later sold for $10,000,000.  A relevant question of what, if anything, Mr Zubcic’s Father was entitled to within the context of the family law matter was then brought up during Family Court proceedings.  

The court found that the Father, who could not adequately read or speak English, had not understood that he was transferring his share in the property to his son in order to assist with his purchase of the franchise.  Further, the court held that the fact that he had not received any monies either at the transfer, or upon the sale of the property, amounted to unconscionable conduct.  The court then found that the Father had acquired an equitable interest in the property that had later been sold for $10,000,000, and in turn assessed that the Father was entitled to a sum of approximately $1,200,000.  

It would seem, as a consequence, that the need to properly document these sorts of transactions within a family may not be necessary, given that the court had adequately protected the Father upon the breakdown of the relationship between Mr Zubcic and his former Wife.  However, that does not give proper consideration to the fact that the Father (who is elderly and unwell) was required to expend a significant amount of money in legal fees, and was in turn unable to access any money for the length of the litigation, which took in excess of 3 years.  

Furthermore, Mr Zubcic’s ex-Wife has now appealed in the proceedings, meaning that the Father is unable to receive the benefit of his entitlement to the sole property, and consequently, is unable to move on with his life.  

Therefore, whilst the court, at first instance, gave credence to the Father’s financial input, essentially “looking after him”, the entire ordeal was at the Father’s considerable expense, both financially and with respect to his health.

The takeaway from this particular case is that if professional legal advice is obtained at the outset of a marriage, it is likely that documents can be drafted to reflect the intention of the parties, as well as the specific financial (or otherwise) contributions made by each of them.  This should effectively avoid the need for the parents of parties to a property dispute to be embroiled in lengthy and expensive litigation.

If you have found yourself in similar circumstances to those of the above case, you have a question relating to any of the above, or you would like to speak with one of our Accredited Family Law Specialists with regard to your personal situation, please don’t hesitate to get in touch.

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