Updated 30 October 2026
CM Law's Ultimate 50 List - Separated Couples FAQ #34: How to handle gifts and personal loans during separation?
How are gifts and personal loans treated during separation?
Gifts and personal loans must be identified and assessed as part of the parties’ financial circumstances. A gift is not automatically protected from property settlement, and a claimed family loan is not automatically deducted. Evidence of ownership, repayment obligations, contributions and each party’s circumstances helps determine a just and equitable outcome.
For separating spouses and eligible de facto couples in NSW, the Family Law Act 1975 governs property settlement. Contested proceedings ordinarily go to the Federal Circuit and Family Court of Australia.
The framework clarified from 10 June 2025 considers existing property rights and liabilities, contributions, and current and future circumstances. The nature of liabilities and how they arose matter. Where relevant, family violence’s effect on contributions and its economic effect are also considered.
Start by distinguishing what was given, what must be repaid and what remains disputed. Labels alone do not resolve those questions.
Can you keep a gift because it was given to you personally?
Receiving a gift personally may establish that you own it, but ownership does not automatically exclude it from a property settlement. Jewellery, a vehicle or money given to one partner can still be considered. The court assesses the overall circumstances rather than applying a rule that every personal gift must be retained.
Keep receipts, messages and transfer records showing who gave the item and to whom. For valuable property, obtain a realistic current value; sentimental value or an insurance replacement figure may not reflect its market value.
Money already spent on a holiday is not a holiday asset still available for division. Record how the money was used instead. Different questions arise if the gift remains as cash, purchased an asset or reduced a mortgage.
Negotiated arrangements can address sentimental items without spending disproportionate amounts contesting their monetary value.
How are gifts from parents or other relatives assessed?
A relative’s gift may represent a contribution by or on behalf of one partner or both. The intended recipient, purpose and surrounding evidence matter. A parental gift does not automatically entitle their child to reimbursement before everything else is divided, and joint ownership does not mechanically determine the eventual settlement percentages.
Preserve correspondence from the time of the gift, transfer documents and evidence of any conditions. Separate a genuine repayment obligation from a donor’s hope that the couple will remain together or use the money sensibly.
In Mabb & Mabb [2020] FamCAFC 18, the appeal court upheld a finding that land gifted by the husband’s parents benefited both spouses. Joint title and the surrounding evidence supported that conclusion. It illustrates the importance of actual intention; it is not a rule that every parental gift is shared equally.
How do you distinguish a genuine loan from a gift?
A loan involves an obligation to repay, whereas a gift does not ordinarily require repayment. The court examines the arrangement and evidence rather than accepting whichever label is used after separation. A private loan can be oral, although missing paperwork can make its existence, borrowers and terms much harder to establish.
Legal Aid NSW’s private-loan guidance explains the value of clear terms and payment records. Relevant questions include:
- Who advanced the money, and who agreed to repay it?
- What amount was advanced, and when was repayment due?
- Were interest, instalments or security agreed?
- Were repayments made, requested, deferred or forgiven?
- Do contemporaneous messages and bank records support the account?
Interest and security are not essential features of every genuine private loan. Equally, a bank transfer proves money moved but may not establish whether it was a gift, loan or something else.
Must every family debt be deducted from the property pool?
Establishing that money was lent does not necessarily mean the entire claimed balance will be deducted when dividing property. The court examines the debt’s certainty, enforceability and circumstances. Family law treatment between the separating parties is a separate question from whether the lender has a legally enforceable right to recover money.
Legal Aid NSW explains that a court may disregard a debt partly or entirely where, for example, it is uncertain or unlikely to be enforced. Missing repayments or demands can be relevant, but neither fact automatically proves the debt is a gift.
A loan’s age, repayment terms and limitation issues also need examination. Do not assume that an old family advance remains recoverable indefinitely.
Likewise, debt in one person’s name is not automatically excluded from settlement consideration. That does not automatically make the other partner a borrower under the lender’s contract.
What can a real family-loan dispute teach separating couples?
A disputed family advance requires evidence and a reasoned assessment, not an assumption that relatives must be repaid. Courts must examine competing accounts of the arrangement. An appeal may require the issue to be heard again without finally deciding that the money was either a gift or a loan.
In Vadisanis & Vadisanis and Anor [2014] FamCAFC 97, the husband’s mother sought repayment of several advances. One involved $100,000 provided to the husband for a property purchase, which the trial judge treated as a debt.
The wife challenged that finding. Her evidence included the absence of a loan or repayment document and her contention that the husband’s sister had received an equivalent gift.
The Full Court found that the trial judge had not adequately explained the loan finding. It allowed the appeal, set aside the relevant orders and returned the matter for rehearing. It did not conclusively decide that this $100,000 was a gift.
The judgments discussed here predate the June 2025 property reforms. Their evidentiary lessons must be considered alongside current legislation.
Does your settlement release you from a joint loan?
An arrangement that your former partner will pay a joint loan generally does not release you from obligations to the lender. Even an indemnity between partners may leave the lender entitled to pursue you. A lender-approved release, refinancing or an appropriate order affecting the creditor may be needed to change that position.
The Australian Government’s guide to separating with debt explains the difference between allocating responsibility between partners and changing a creditor’s rights. Special orders binding a creditor require statutory safeguards and procedural fairness; they are not an automatic consequence of separation.
Check who signed the loan, any guarantees, the outstanding balance and what the lender requires before agreeing to a transfer. Do not stop repayments solely because your former partner has promised to take over.
Parents or friends claiming repayment may need independent advice and, where appropriate, involvement in the proceedings. Their interests may differ from either partner’s.
What records should you disclose and preserve?
Disclose relevant gifts, debts and money owed to you, including disputed family advances, and explain any disagreement about their treatment. Preserve the original evidence and update outstanding balances. A loan receivable may itself be property, so financial disclosure must address both money you owe and money others owe you.
Prepare a transaction timeline supported by:
- Loan agreements, gift letters and relevant messages.
- Bank statements showing advances, repayments and remaining balances.
- Property purchase records and any mortgage or security documents.
- Demands, agreed extensions, releases and evidence of forgiveness.
The disclosure duty continues through preparation for proceedings and until finalisation. A disputed debt should be identified and explained, rather than silently omitted.
Do not backdate documents or manufacture repayment terms. If you write a later account of an earlier conversation, identify when that account was actually prepared. Obtain advice before signing an acknowledgment of a disputed debt.
What steps should you take before agreeing to a settlement?
Obtain advice about ownership, loan terms, evidence and creditor rights before agreeing to repayment or a final division. Prepare a shared schedule identifying agreed and disputed amounts, then consider negotiation or mediation where safe. Have the proposed settlement and its implementation checked by a lawyer before signing or transferring significant assets.
Ask whether property settlement mediation could narrow the disputed transactions. Compare the amount genuinely in dispute with the likely cost of evidence and litigation. Avoid repaying relatives or granting new security simply to reduce what appears available for settlement.
Consent orders and compliant financial agreements are different ways to formalise financial arrangements. Each requires careful consideration; financial agreements require independent legal advice for both parties.
Check family law filing deadlines and any separate debt-recovery limitation period promptly. Tell your solicitor if pressure, threats or financial control affected borrowing or repayment decisions.
Contact Christine Manolakos and CM Lawyers with your records for advice about property settlement and the treatment of gifts or personal loans.
General information for people separating in NSW, not individual legal advice. Have any proposed agreement or legal action checked by a lawyer against your circumstances.
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