What Happens to Gifts From Parents in Divorce?
Divorcing parties generally understand that most of their property is subject to equitable division upon divorce. Many parties hope to keep as much of their own property separate as possible. There are certain categories of assets that are considered separate property, even if they were acquired during the marriage. Depending on the circumstances and the actions of the parties, parental gifts and inheritance can be kept out of equitable division upon divorce. Read on to learn how New Jersey treats parental gifts in divorce, and contact a seasoned Englewood divorce and property division attorney for help with a New Jersey family law matter.
The General Rule for Marital Property
The default rule is that marital property includes all assets or liabilities acquired during the marriage, from the date of marriage until the date a divorce is filed. Income, windfalls, and value growth during a marriage are all potentially marital property subject to equitable division upon divorce. Property acquired before or after the marriage is separate and not subject to division.
Exceptions: Inheritance and Gifts to One Spouse
There are a few exceptions to the general rule. Inheritance to one spouse is generally considered separate property, even if acquired during the marriage. Likewise, gifts from a third party that are specifically meant for a single spouse, as opposed to the married couple, will be treated as separate property. N.J.S.A. 2A:34-23 specifically states that property acquired “by either party by way of gift, devise, or intestate succession shall not be subject to equitable distribution.” Gifts from one spouse to the other are, however, typically subject to equitable distribution, regardless of title.
In many, if not most, cases, the third party giving the gift is the parent of one spouse. That gift can take the form of money, real property, personal property, or any other sort of property. So long as the gift was intended to be for one spouse, as opposed to a gift given for the benefit of the couple, then it is not subject to equitable distribution. If the other spouse claims that the gift was meant for the couple, the recipient spouse will need to demonstrate that the gift was meant for him or her alone. Proof can take the form of written statements (e.g., a letter or gift card), testimony, a will, title to the property, or any other proof of the gift-giver’s intent. Growth in the value of a separate asset, such as an investment account given by gift to one spouse, will also remain separate property.
Exception to the Exception: Commingled Assets
Separate property may be converted into marital property if separate and marital property are commingled. If a spouse uses marital assets to maintain and improve upon a piece of real estate that was originally given as a gift, then the rents and increase in value of the property could be treated as marital property. If marital funds are transferred into and out of an investment account that was originally separate, some or all of the account might be subject to equitable distribution. A monetary gift to one spouse deposited into a joint marital checking account will likely join the pool of marital assets unless the party can use a complex “tracing” process to separate joint from separate funds; tracing becomes exponentially more difficult the longer the funds are commingled.
Call Herbert & Weiss in Englewood for Help With New Jersey Property Division Claims
For seasoned advice and effective representation in your New Jersey divorce, contact Herbert & Weiss at 201-440-6300 for a consultation with talented, dedicated, and passionate Englewood family law attorneys.