Transferring Premarital Assets to Joint Names Without Donative Intent

1. If a spouse transfers premarital assets into a joint account during the marriage, how are these assets treated if the parties subsequently get divorced?

In today’s world, especially in second marriages, premarital assets are often placed in joint names during the marriage. There are many reasons to do this. The first major reason is for asset protection purposes. A husband may be self-employed and his business may be failing. He may want to transfer assets into the wife’s name to protect them from his creditors. A second major reason occurs when a bank or mortgage company requires it. In many types of refinancing transactions, a bank or a mortgage company will require that both spouses be placed on the title to the marital home when a premarital mortgage is refinanced.

It is extremely important to emphasize that when a premarital asset is placed into a joint name, many legal implications are triggered. It is black letter law in New Jersey that a premarital or an immune asset is generally not subject to equitable distribution. However, if an asset is placed in joint names, then the court has the power to distribute those assets under N.J.S.A. 2A:34-23.1.

2. Are there any exceptions to the legal principle that premarital assets that are placed in joint title are subject to equitable distribution?

Yes, there are certainly exceptions. In the case of Dotsko v. Dotsko, 244 N.J.  Super. 668 (App. Div. 1990), the court established an important exception to the legal principle that assets placed in joint title are subject to equitable distribution.

In the Dotsko case, Mr. Dotsko’s father and aunt made several gifts to him. The father and the aunt had a specific intent that these gifts would benefit only the husband. Thereafter, Mr. Dotsko, only for convenience and only for a short period of time, placed these gifts into a joint account while he was waiting for one more gift to be made. Once that belated gift was made, he then removed the funds from the joint account.

The parties eventually got divorced. At the divorce hearing, the wife argued that since the funds had been placed in a joint account they were automatically subject to equitable distribution. The trial court agreed with the wife and held that the transfer into the joint account was an inter-spousal gift.

The case was appealed and the court ruled that the transfer of these funds into a joint account was not a gift. The Appellate Division applied the legal principle of examining the donor’s intent. The Appellate Division further held that the father and the aunt did not have a donative intent to transfer these funds to the wife. Thus, the court held that absent any donative intent, there was not a valid legal gift.

3. What is the legal importance of the Dotsko case?

The Dotsko case is a very important one. Whenever an immune asset is transferred into joint names, then there must be an inquiry as to why the transfer was made. In a common scenario, where a premarital home is refinanced and the owner is advised that the new spouse must be on that deed, the mere fact of adding the spouse to the title does not necessarily satisfy the clear donative intent requirements. An argument can be made that a true title transfer did not take place, because the owner did not intend to make a gift and that he never had any donative intent considering that the transaction was only a legal requirement of the bank. Thus, in this type of scenario, an argument can be made that the wife only received bare legal title, not automatically making the asset subject to equitable distribution.

4. Are there any other significant New Jersey cases that address placing immune assets into joint names during the marriage?

Yes, another interesting case is Ploszaj v. Ploszaj, (Unpublished, December 20, 1984). Here the Appellate Division affirmed the trial court’s ruling that even though an exempt and immune asset was placed in joint names, it was not subject to equitable distribution. The court reasoned that the grantor had a lack of donative intent.