Treatment Of Gifts And Heirlooms In A Divorce

• Published date: 04 January 2022
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Family Law, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, Divorce, Wills/ Intestacy/ Estate Planning
• Law Firm: Gall
• Author: Ms Caroline McNally

In financial proceedings on divorce, both spouses will be required to disclose their personal belongings, which may include items that they have received by way of gift, including family heirlooms. Such assets usually attach high sentimental value and have been given to the spouse with a general understanding that they will be kept 'within the family' and passed down through generations. Therefore, it is understandable that tensions often arise in respect of the treatment of gifts and heirlooms on divorce.

This article will highlight the Family Court's approach in Hong Kong when dealing with assets such as gifts and heirlooms.

Recent case

Our firm was recently involved in the case of W,LT v GWH also known as HGW [2021] HKFC 142 concerning a dispute over a painting that had been in the family for over 120 years. It was directly acquired by the husband's great grandfather, passed on to the husband's grand aunt by inheritance, and then to the husband's father by inheritance. The issue arose when the wife alleged that the family painting formed part of the marital assets that were subject to division.

The husband had entered into a family agreement with his father to purchase the painting as an advance inheritance to enable his parents to buy a home for retirement. Subsequently, they entered into another agreement where the husband transferred the painting back to his father.

In considering the wife's application to set aside the subsequent transfer, the Judge held that the agreements between the husband and his father was entered into with very specific issues in mind, the central one being that the painting should be preserved and if possible, retained by the family for future generations.

The Judge declined to set aside the transfer and concluded that the painting was clearly an inherited property. It was initially acquired by the husband's family by way of inheritance and from a source wholly external to the marriage. In reaching her conclusion, the Judge referred to LKW v DD (Ancillary Relief: Guidelines) [2011] HKFLR 106 where Mr Justice Ribeiro PJ said inter alia the following:

'87. The source of an asset may provide a reason for excluding it from the sharing principle on the basis that it is not an item of matrimonial property. Of course, in many cases, no question of any distinction between matrimonial and non-matrimonial property will arise. But where there are assets which may be capable of being so differentiated, section 7(1)(a) implicitly...