From Handbags To Jewellery To Yachts - Can Luxury Gifts Be Retained In A Divorce?


Elaine Sum, Counsel and Rachael Leung, Associate

31 August 2021


Introduction


Hong Kong retail sales experienced a surge in the first six months of 2021, primarily driven by extravagant spending among high net worth individuals/ families[1].


While it must be exhilarating to be showered with opulent gifts by your spouse or parents-in-law – from Hermes Birkin bags to Piaget diamond watches to Maserati cars to San Lorenzo yachts – are these gifts really yours to keep when you and your spouse divorce? What about an unheated Burmese ruby necklace or a house on the Peak that your in-laws gifted you after you gave birth to a boy – an heir to the throne in a wealthy Chinese family? And what about all those lai-see money and cash gifts you have received from your parents over the years? This article will give you an overview on how Hong Kong Courts will treat gifted assets during divorce and how these luxury gifts may be protected.


Are Gifts Included or Excluded In Asset Split?


Generally speaking, all assets will be taken into account to compute the matrimonial pot and valuable gifts are no exceptions. Both you and your spouse have a duty to make full and frank disclosure of your assets and liabilities by listing them all out in the Financial Statement (also known as “Form E”) backed by supporting documents. For valuable chattels such as luxury handbags, jewellery, watches, artworks, antiques and even expensive wine collection with high resale value, experts may be appointed to conduct valuations if their values cannot be determined or agreed upon. It is not uncommon for lawyers to jointly attend a party’s home and inspect their personal valuables for the purpose of identification and valuation.

After the Court is able to gauge the full size and composition of the matrimonial pot, it will then decide how assets (including gifts – be it from your spouse or other third parties) should be divided under the overarching principle of fairness. The Court will first look at the parties’ respective needs, which are to be determined with reference to factors such as the marital standard of living, the parties’ age, their earning capacity and length of marriage. If there are insufficient assets to meet the parties’ needs, gifted assets may need to be transferred or even sold.


Where the matrimonial pot is big enough to cater for both parties’ needs with surplus assets remaining, the Court will decide whether the whole pot should be divided between the parties equally. Source of asset is one of the factors which will be considered by the Court. If the origin of funds is non-matrimonial, it may justify departure from the equal sharing principle. For example, family heirlooms inherited prior to marriage may be regarded as non-matrimonial if they are segregated from the matrimonial assets during the marriage. After all, family gifts and inheritance cannot be regarded as marital acquests and a party will receive them irrespective of whether he/she is married or not. However, where a “non-matrimonial” asset is applied for the benefit of the family, say you regularly take your family out on the yacht your parents(-in-law) gifted you, it could evolve into a matrimonial property.


Chanel/Hermes handbags or diamond jewellery gifted by a husband to a wife and purchased with money earned during the marriage are likely to be considered as fruits of the marriage, hence matrimonial properties prone to be shared. Whether those gifts form part and parcel of living standard and should be excluded will be subject to arguments. There is no simple or straightforward answer as the Court has a wide discretion in determining how assets are to be divided by reference to all the circumstances of a case.


Can Gifts be Ring-fenced?


Nuptial agreements – be it pre-nuptial or post-nuptial – may be one effective way in protecting and securing your interests in gifted assets in the unfortunate event of a divorce. Although such agreements are not binding in Hong Kong, the Court may give substantive, if not full, weight to them if it is procedurally and substantively fair to do so. The following are the major conditions which the Court will be take into consideration:-


1. Both you and your spouse have received (separate) independent legal advice;

2. You and your spouse fully appreciated the implications of the nuptial agreement by

having all material information including but not limited to financial information made available to the other;

3. You and your spouse entered into the agreement out of his or her own free will

without any duress, undue influence or pressure. For pre-nuptial agreements, it is

recommended that there should be a period of reflection of at least 28 days

between signing and the marriage;

4. It must be fair in the circumstances prevailing at the time of the divorce to hold the

parties to the agreement so that the financial weaker party would not be left in a

predicament of real need. This makes it important there is at least a reasonable

financial arrangement to provide for a financially weaker party in the agreement.


In the absence of a written agreement, be mindful of how you treat the gifts, particularly pre-marital gifts and gifts received from third parties during the marriage. Contemporaneous evidence such as WhatsApp messages may come in handy to show the intention of the gift maker in terms of the ultimate beneficiary(ies) and usage of the gifts.


Some families may purchase “gifts” such as super yacht or real property and hold them under a trust. When determining whether such “gifts” should form part of the matrimonial pot, the Court will look into the type of trust, the intention at the time the “gifts” were made, the treatment of the same during the marriage and the circumstances pertaining to the divorce.

There are no hard and fast rules. If you have any queries or require legal assistance, please contact Elaine Sum.


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[1] Hong Kong's consumption rebound led by wealthy stuck at home, Nikkei Asia, 17 August 2021



Disclaimer: This article is only a general summary of relevant family law in Hong Kong and is not intended to constitute legal advice or create legal relationship.