But I Don’t Really Own That Property

by Peter Magee on October 23, 2016

Byron Leong

Australia has seen an increase in Chinese families moving to Australia to live from China, therefore an increase in separation of Chinese immigrant couples. Separations involving Chinese immigrants often have the complexity of assets in China. Not only are there assets in China but there may be the issue of who truly owns them.

Chinese families have a history where the entire extended family lives in one property. This includes grandparents, parents, adult children and children. The respect for the older generation is entrenched in Chinese culture as the elder generation was cared by the next generation and so on. This cultural aspect of caring “for your elders” is reflective in the Marriage Laws of the People’s Republic of China where a maintenance order can be made against adult children to financially provide for their elderly parents.

The focus on the family has resulted in many Chinese parents transferring properties (more commonly apartments) in China to one of their adult children before they pass away on the expectation that they will continue to live in the property until their death. Whilst the adult children understand that the property belongs to his or her parents, it becomes problematic if the adult child separates from his or her spouse and they are living in Australia.

Section 79 of Family Law Act 1975 provides that an Australian Court can make an order about how to divide assets of parties who have separated. The first step in the process is to identify all legal and equitable interests belonging to the parties. This includes any overseas assets. Therefore, in the above example the property transferred to the adult child is part of the assets available for division pursuant to Australian family law despite the intention of the parents. In practical terms, the adult child does not have the benefit of the use of the property and will need to ensure that he/she retains the property in the property settlement ensuring that the home of his/her parents is not lost. This may place the adult child in a position of disadvantage in negotiations for property settlement.

To minimise the impact of a transfer in such a scenario then the adult child should consider:

  • Obtaining advice from a Chinese family lawyer about the creation a Trust where the adult child holds the parent’s property on trust for the benefit of his/her parents before the transfer of property happens;
  • Obtaining advice from a Chinese family lawyer about entering into an appropriate agreement pursuant to the Marriage Laws of the People’s Republic of China about how assets are to be divided if the adult child and his/her spouse were to separate;
  • Obtaining advice from an Australian family lawyer about entering into a financial agreement that is binding pursuant to the Family Law Act 1975 about how assets are to be divided if the adult child and his/her spouse were to separate with the terms of such agreement to be equivalent to an agreement entered into pursuant to Chinese family law.

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