In financial remedy proceedings, this question is particularly important because how this money is treated impacts the amount of money in the marital pot.
If this payment is treated as a gift, it can be considered as a contribution given to the parties that does not have to be repaid. This money can instead be included in the matrimonial pot and used to meet the parties' needs.
If this payment is treated as a loan, it cannot be considered part of the matrimonial pot and instead will be noted as a liability that must be repaid, much like a loan from a bank.
In the recent case of P v Q (Financial Remedies)  EWFC B9, HHJ Hess has summarised the factors to be taken into account when determining whether money given to a party by their family prior to or during marriage should be regarded as a gift or a loan.
The key factor is whether it was likely in reality that the obligation would be enforced.
Factors pointing to a hard loan include:
Factors pointing to a soft loan (gift) include:
In this case the court concluded that some factors might fall on one side of the line and others might fall on the other but ultimately it is for the judge to determine the appropriate and fair outcome, looking at all the factors.
This case is a reminder that payments given to parties by family members may be considered as a gift if there is not a clear obligation for repayment. If you are receiving or giving money in this context and would like this to be repaid, it is important to ensure that a written agreement is made. However, even then it cannot be guaranteed that this type of payment will be considered a loan rather than a gift and the ultimate discretion is with the court.