When asked for advice from a young women set to break off an engagement about any obligation to return the engagement ring, Hollywood socialite Zsa Zsa Gabor once famously said “of course you should return the ring darling – but make sure you keep za stone!”

Questions about inclusion or exclusion of jewellery in the asset division exercise at the end of a relationship, do not come up that often, but when they do it tends to create a lot of heat!  If the jewellery is included, the holder will have to pay the giver a proportion of the item’s value to keep it.  If excluded,  the money originally spent on the item by the giver is lost.

The law for separating married couples is different to those who break off the relationship at the engagement stage.

The Federal Family Court resolves disputes for married couples.  Cases over the last 20 years on the subject have been inconsistent, but generally can be grouped into three broad categories.

Big ticket items only – under this approach, the Courts have only dealt with assets of “significant” value such as real estate, businesses, share portfolios and the like.  In each judgement the Courts have ignored the smaller “chattel” items such as furniture, motor vehicles and jewellery determining that the person in possession of these items should simply keep it as their own property with no cash payment required.

All in – in these cases the Courts have applied a literal interpretation of the Family Law Act which says that if the item is capable of being sold or traded for value, then it is a divisible asset and should be counted.

Gift -v- Investment – here the Courts have ruled that without clear evidence that the item was purchased by the parties with the intention of being retained as an investment for ultimate resale, the item should be classified as a gift and consequently excluded from the asset division exercise.

Which approach is correct?  Technically, the “all in” approach is probably the most correct, but the most recent decisions on the subject have favoured the “gift -v- investment” approach.

Couples who never get past the engagement, must take their disputes for jewellery to the State Courts.  Thus far, there appears to have been no reported decision from any Court on the subject however, if it did come up, it is likely the Courts would apply a legal principle called the “presumption of advancement” which is a close relative of the “gift -v- investment” approach referred to above and effectively applies the same test.

The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information.  When making decisions that could affect your legal rights, please contact us for professional advice.