As property prices keep rising, young people — especially fresh graduates just entering the workforce — increasingly lack the financial capacity to buy a home. It is becoming more and more common for parents to fund all or part of the purchase price. However, when a property is bought with parental funds or transferred by parents into a child’s name, disputes over ownership often arise, particularly when property settlement or a sale of the property is involved. This article will walk through Xiao Ming’s story to help answer these questions.

Scenario 1: Parents pay directly, property registered in both names

Xiao Ming and Xiao Hua were university classmates. They fell in love and got married. After marriage, they wanted to buy an apartment to live in, but having just graduated, they did not have the financial capacity to fund the purchase. So Xiao Ming’s parents contributed $1 million and paid the full purchase price, and the property was registered in the couple’s joint names. Several years later, their relationship changed and they decided to end the marriage. Xiao Ming argued that because his parents paid for the property, it was not joint matrimonial property and should not be included in the property settlement.

Do you agree with Xiao Ming?

The answer is that the law sides with Xiao Hua this time — the property should be included in the property settlement pool.

In Australia, where purchaser A buys a property and voluntarily transfers it into B’s name, the law will generally presume that B merely holds the property nominally on behalf of A, and does not truly enjoy full beneficial ownership — this is called a “Resulting Trust”. The legal reasoning is that, even though the property is registered in B’s name, the law will not default to assuming that A intended to gift such a valuable asset to B, unless A has clearly expressed that intention.

However, where parents buy a property and voluntarily transfer it into their child’s name, or voluntarily provide funds for their child to purchase a property, the law will presume the conduct to be a gift. In other words, even without any express statement of intention from the parents, the property will be treated as a gift to the child. Accordingly, in this case, because Xiao Ming’s parents did not clearly articulate the nature of the funds they provided for the purchase, the property is taken to be a gift from the parents to their child. Xiao Ming’s parents do not hold any beneficial interest in the property, and the property should be included in the settlement pool.

# Scenario 2: Parents pay first, then declare it was not a gift

After the property transaction was completed, Xiao Ming’s parents came across this article and were shocked. They immediately called Xiao Ming and Xiao Hua home and, with a lawyer present as witness, formally declared to the couple that the $1 million they had provided for the purchase was not a gift from parents to child — the parents were the ultimate beneficial owners of the property, and the couple merely held the property on behalf of the parents. Xiao Ming and Xiao Hua later separated. So, in this situation, how should the property be characterised?

The answer is the same as before — nothing has changed! Nothing has changed!!

Even though Xiao Ming’s parents made an express declaration, they still cannot claim a beneficial interest in the property. Their conduct is regarded in law as self-serving, and cannot displace the earlier presumption that the property was a gift to the child. The legal reasoning is that a legally established intention cannot simply be changed at will by a unilateral act — does the law have no self-respect, that one party can just flip it for their own benefit? It is like A giving B a bottle of wine: once B has finished drinking it, A cannot turn around and say, “Sorry, the wine wasn’t a gift — I only asked you to look after it, now please pay me back.” The law will not support forcing B to spit the wine back up. 

The parents’ after-the-fact declaration does not affect the earlier default gift, and the property should be included in the property settlement pool.

Scenario 3: Get advice first, declare first, then pay #

Xiao Ming’s parents had been following NS Legal’s WeChat official account for some time and had a strong sense of legal awareness. Before providing the purchase funds, they obtained detailed legal advice and made it clear to the couple that the funds were not a gift. The property to be purchased, although to be registered in the couple’s joint names, was in fact to be held by the couple on behalf of the parents, and the parents would retain the ultimate beneficial interest in the property. Several years later, Xiao Ming and Xiao Hua’s relationship broke down.

In this situation, Xiao Ming’s parents successfully protected their own assets.

By using a proper legal mechanism, they separated their own assets from those of their children — meeting their children’s housing needs while preserving their own interests. In Australia, the law can help you plan, manage and pass on family assets in a structured way that suits your family’s particular needs.

Scenario 4: The buyer, Zhang San, says “I had no idea”

The story continues. Xiao Ming’s parents had declared in advance that the funds they provided to the couple for the purchase were not a gift, and that the couple did not hold the ultimate beneficial interest in the property. Several years later, the couple felt heavily pressured by debt, so they sold the property to Zhang San for $1 million. The full sale was completed, the transfer was registered, and the purchase price was received. When Xiao Ming’s parents found out about the sale, they were furious, and declared to the couple and Zhang San that they were the true owners of the property, that the couple had no right to sell it, that the transaction was void, and that Zhang San should return the property. Are the parents right? Can Zhang San become the owner of the property?

The answer is that through this transaction, Zhang San has already obtained indefeasible title (Indefeasible Title) to the property. Xiao Ming’s parents cannot require Zhang San to return the property. 

Throughout the transaction, Zhang San was without fault. He could not and should not have known about the relationship between Xiao Ming’s parents and the property. He had fulfilled all his obligations in the transaction and completed Torrens title registration. He therefore lawfully acquired ownership of the property, and that ownership is indefeasible. In this scenario, if Zhang San is without fault, Xiao Ming’s parents cannot claim that the transaction is void, but they can assert their rights to the $1 million sale proceeds.

Scenario 5: The buyer, Zhang San, is acting in bad faith!

The story continues. Xiao Ming’s parents had declared in advance that the funds they provided to the couple for the purchase were not a gift, and that the couple did not hold the ultimate beneficial interest in the property. Several years later, the couple felt heavily pressured by debt and wanted to sell the property to raise cash. Zhang San approached Xiao Ming and said, “I’ve studied some law — Australia’s real property system is based on system registration. The property is registered in your names; your parents’ interest in the property isn’t registered, so it’s worth nothing. I’ll help you cash it out — just sell it to me cheaply.” On that basis, although the property was worth $1 million, Xiao Ming would sell it to him for $600,000, and Zhang San would pay off $300,000 of debt directly on his behalf, and the parents would have no way to challenge it. The couple followed Zhang San’s plan and transferred the property for $600,000.

In this situation, although Zhang San completed Torrens title registration and obtained ownership of the property, unlike Scenario 4, the title he obtained is defeasible. During the transaction, Zhang San was not acting in good faith — he knowingly bought the property at a low price despite being aware that the title was flawed, and is arguably guilty of Fraud in the course of the purchase.

Therefore, the title Zhang San obtained is a defeasible title (Defeasible Title). Xiao Ming’s parents can apply to have Zhang San’s ownership of the property set aside.

Big money — be careful, and plan ahead!

From Xiao Ming’s story, it’s easy to see that although parents funding a child’s property purchase is very common, it actually carries all sorts of legal risks. As the saying goes, even an honest judge finds it hard to settle a family dispute. Rather than scrambling for a response once a dispute has arisen, it is far better to put risk-prevention measures in place in advance, obtain legal advice early, and design an asset management plan that best suits your family’s situation.