NSW Protection of home bought with loan from parents in event of divorce

[Rob1835744]

i bought the martial home during the marriage.
Source of funds was a loan to me from my parents.
It was documented and registered with government. That is a caveat placed over the home, specifically in case i got divorced
Doesnt this mean in a divorce, the home is a ‘liability’, that my partner is unlikely to contest?
If i had no other assets or cash, wouldnt this mean she cant touch the home?
In NSW. No kids

 

[Tremaine]

The property itself would still be considered a part of the shared asset pool in a property settlement, meaning your partner would still have a claim to some of its value. The contribution from your parents could be declared a gift to you, making it a greater financial contribution to the house on your part, or it could be a debt that would still need to be considered as a liability in the property settlement.

 

[Rob1835744]

Thank you. I don’t think the loan could be thought of as a gift due to the documentation and caveat. However it would have been better If my parents had taken out a second mortgage secured against the property, then the house itself is ‘protected’ since the loan is irrevocably linked to the house. As the net value to the pool is 0, is will be left alone?

 

[sammy01]

how long was the relationship? how long were you married?

 

[Tremaine]

The house would still be considered part of the shared asset pool to be divided in a property settlement, regardless of net value.

The court basically works out a property settlement by asking four questions:

1. What’s the value of the shared asset pool?
2. What are the financial and non-financial contributions of each party?
3. What are the future needs of each party?
4. Is the settlement just and equitable?

The house itself would fit into the first question. There’s no avoiding that - it’s marital property if it’s owned by either one or both of you and you were/are married or de facto, and the only way to have it excluded is if you and your partner signed a binding financial agreement to that effect. Obviously, if the title deed is in your parents’ name/s, rather than yours, that would be a different story.

The contribution made by your parents would be considered a debt under the first question (or otherwise as a financial contribution by you under the second question, if the money had been a gift rather than a loan). Both you and your partner would be liable for that debt in a property settlement.

A caveat, as I’m sure you’re aware, basically stops the property from being legally dealt with (ie bought or sold) because someone else has a legal interest in it. Your parents, seeing as they took out the loan, would be one party with a legal interest. Your partner would be another seeing as it’s marital property and therefore subject to a property settlement.