Protecting Family Assets

On Friday 15th June 2002, Richard Brading, Principal Solicitor for Wesley Community Legal Service, Sydney, gave a very informative talk to the bi-monthly Gambling Practitioners Forum. Richard has kindly given his permission for his key point to be published and his full paper is available through the Wesley Gambling Service.

OVERVIEW

There is a fundamental clash between the right of the gambler to gamble and the desire of family members to protect family assets. While there are a few legal tools that may assist, the law is generally not helpful to family members. Continued gambling will inevitably progress from asset reduction to debt, with the gambler either selling assets or borrowing money to gamble. Often such borrowings are secured against the assets such as the family home. Once the gambler has exhausted their own resources, they will look to family, friends or work mates to supply cash for gambling. Creditors may then apply increasing pressure to recover their money that may result in further loss of assets, employment, relationships and bankruptcy.

Family members are often seeking a quick solution to their dilemma. Often they are unwilling to consider or discuss the relationship. However, the success of the response to a gambling relative is related to an understanding of the problem gambler and interaction with him/her. Without knowing where the relationship is and the type of behaviour the gambler has exhibited it is difficult to advise on the best ways to protect assets.

WHO OWNS WHAT?

It is important to know who owns what in a relationship. An asset is easier to protect if it is in the name of the non-gambler, or in joint names. If unsure, the information about ownership is shown on the Council rates notice, or vehicle registration or receipt of purchase of other goods.

LEGAL OWNERSHIP AND COURT ODERS

If property is owned by the gambler, a non-gambling spouse or de-facto partner may still claim an equitable interest, or constructive trust, if there has been substantial financial contribution to the acquisition of the asset, that is the partner paid for wholly or in part.

If the partner is married to the gambler or they have been living together in a marriage-type relationship, then a claim may be made for a property settlement under the Family Law Act 1975 (Cth), or the Property ( Relationships) Act 1984 (NSW). (This can be conducted within a marriage/de-facto relationship and is not subject to undertaking divorce proceedings). Note there is no legal interest created by marriage or cohabitation. The legal interest is only created by a court order.

THE FAMILY HOME

The best way to protect the family is to ensure the title is registered in the name of the non-gambling partner. This is best achieved by convincing the gambler it is in the best interests of the family. If transferred pursuant to a registered property settlement (through a court order), the transfer is exempt from stamp duty. Otherwise stamp duty will be payable (eg $8,992 on a home or interest worth $300,000).

If the gambler does not agree to transfer the home, it may be necessary to apply to a court for a property settlement.

If the title is in the name of the gambling partner there is always an element of risk. A caveat can be lodged at the Land Titles Office by the non-gambling partner claiming an interest pursuant to Constructive Trust for a modest fee (about $58). However, a caveat is very limited protection, it will prevent a mortgage being registered on the title but provides no protection against unregistered mortgages, unsecured debts or bankruptcy.

CARS

Registration of a car is strong evidence of ownership. If the car is owned by the gambler or registered in his/her name, it is at risk of being sold or mortgaged. It is therefore best that the registration be transferred voluntarily or by court order into the name of the non-gambling partner. A partner claiming an interest in the vehicle may be able to register that interest with the Register of Encumbered Vehicles.

OTHER PROPERTY

Possession is 9/10 of the law. So property that can be sold or pawned, is at risk of disappearing. Household members should be warned of this. The best protection is to remove such items so they cannot be found.

BANK ACCOUNTS ETC

With the consent of the gambler, these can be changed to require both parties to sign to withdraw funds. However, there remains the risk that the gambler will forge the non-gamblers signature on a withdrawal form and access the money.

Where there is a joint overdraft-type facility, the bank should be directed in writing not to provide any increases without the written consent of the partner. Sometimes banks refuse this type of direction. If so, a complaint can be made to the Banking Ombudsman.

CREDIT REPORTING

If the gambler agrees, a notation can be placed on the gambler’s file with the Credit Advantage (02 9464 6000) such as “ No further credit without the approval of my gambling counsellor”.

Where a gambler expects the family to pay his/her debts, it may be desirable to let debts fall into arrears, so that a default will appear on the debtor’s credit file.

Where a family member is worried about a forged credit application, s/he can pay for My Credit Alert service from Credit Advantage at $30 per annum. The service will report any finance applications or overdue listings.

DOCUMENTS

If there is any possibility of a property settlement claim or other court proceedings in the future, it is very helpful for the family to obtain originals or copies of documents evidencing the extent of the gambling and financial history. Such things as bank statements can be very important.

SEXUALLY TRANSMITTED DEBT

A gambler seeking cash can exert a great deal of pressure on family members to assist by signing, lending, or borrowing. It is important that the family members understand that whatever legal or moral obligation to repay the money, the practical reality is that they probably will never get the gambler to repay them.

POWER OF ATTORNEY/CONTROLLED MONEY

If the gambler is serious about stopping gambling, granting a family member a power of attorney and control over finances can be of assistance.

GUARDIANSHIP TRIBUNAL/PROTECTIVE COMMISSIONER

The Guardianship tribunal can make orders appointing the Protective Commissioner to control the gambler’s financial affairs. They will not make an order if gambling is the sole problem. There needs to be another psychiatric disorder, such as dementia.

SELF-EXCLUSION

Most gambling venues will agree to ban a patron who signs a self-exclusion agreement. So when the gambling has stopped, family members should encourage the gambler to sign a self-exclusion agreement. Self-exclusion will reduce the likelihood of a relapse. Refusal to self-exclude may indicate a lack of commitment to overcoming the problem.

GETTING THE GAMBLER BANNED

Family members do not have a legal right to get the gambler banned without the gambler’s consent. However, a letter to the gambling venue setting out details of the hardship the gambler is causing to the family may influence the venue to take positive action. Once the venue knows the patron has a gambling problem, the venue has a higher duty of care to the patron.

CHANGING WILLS

Family members should be advised to consider changing their will to take into account the risk of an inheritance being lost to gambling.

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