They say the difference between whether money paid was a loan or a gift would depend on who you were asking – the giver or the receiver
It should not come as a surprise that a lot of parents who would happily gift their child and his/her new spouse a monetary amount at the start of the relationship would turn around and demand it back when they realise that the relationship is ending.
So to determine the question of whether it was a loan or a gift the courts have come up with a set of criteria:
1- It is a loan if
a) there is an agreement (preferably witnessed) in writing setting out the terms clearly including interest, repayments and the term of the loan.
b) there are clear bank records showing the repayments being made on a regular basis; and
c) it is clear what the loan was for (eg to start a business or buy a property)
2- It is a gift if
a) there is an agreement but it states that the money is a loan payable on demand and/or there are no clear terms set out;
b) bank repayments start happening after separation has occurred; or
c) there are a lot of different explanations as to what the money was used for.
One thing to know is that if the amount given is found by the court to be a gift then it could count as a contribution to the relationship by the spouse who received the gift.
By Nadia Messiha
