How does the Court treat money from family members when determining Financial Remedy proceedings?

24th February 2022
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Very often in financial remedies cases, one or both parties have received money from family members (usually parents) either before or during the marriage, and the question arises as to whether these monetary advances should be taken into account in the overall division of the matrimonial assets.

When the Court decides how to divide the assets, the parties’ liabilities are included on the asset schedule e.g. bank loans, credit card debts. With regards to money from family members and whether these sums should be included in the liabilities section of the asset schedule, the first question for the Court to determine is whether the money was a gift or a loan. Gifts by their nature, will not be included in the parties’ liabilities.

If the money is to be considered a loan, the Court needs to decide whether the monies advanced constitute a soft or hard loan, as it is likely that only hard loans will be included in the asset schedule.

This was a question considered by His Honour Judge Hess in a case determined this month – P v Q (Financial Remedies) [2022] EWFC B9. Both the husband and wife had at various times received money from their respective parents.

In his Judgment, HHJ Hess decided that a €30,000 interest-free loan from the wife’s father to the wife was “very much at the soft end of the scale” given that the father had never sought repayment and the wife had forgotten about the loan until January 2022. HHJ Hess thought it “most unlikely that the wife will be required to make any repayment.” Therefore he did not include the debt on the asset schedule.

With regards to a £150,000 loan from the husband’s mother, HHJ Hess decided that this too was “at the soft end of the scale.” However, the husband had repaid the loan in June 2020 (following the breakdown of the parties’ marriage) and HHJ Hess decided that his motivation for doing so was to prevent his wife from sharing in half of the money. He did not attribute “hard debt status” to the loan simply because the husband had repaid it, stating that to do so would be to “reward and encourage manipulative behaviour” and he re-credited the £150,000 to the husband’s side of the asset schedule.

In conclusion, if you have been offered financial assistance from family members, it is sensible to get something from them in writing to clearly spell out whether the money is a gift or a loan, and in the case of a loan, how much is to be repaid and when.

Contact Our Family Law team

If you would like some advice regarding gifts or loans from family members and how these are likely to be viewed in terms of financial remedy proceedings, please contact the Family Team on 01273 249200 to arrange an initial fixed fee consultation.