Gifts and Loans from Parents in a New Jersey Divorce

Are gifts or loans from one spouses parents divided in a divorce?

If a relative gives you a gift or inheritance during your marriage, will you need to split it with your spouse upon divorce? The answer typically depends on the relative's wishes. If this person meant for the gift or inheritance to be yours alone, then you'll probably get to keep it. There are some exceptions, however. Read on to find out more.

Gifts and Inheritance are Separate Property

A gift is something delivered to you with the intent that it be a gift, and with no intention of getting it back. An inheritance is property you receive by will, a trust, or intestate succession – a process used by the state to distribute an estate when there is no will or trust. When you divorce in New Jersey, you usually get to keep any gift (including loans), or inheritance received from your parents or any relative during marriage, unless that relative is your spouse.

If not received from your spouse, the gift or inheritance is your separate property. Separate property is not subject to equitable distribution at divorce. But there's a catch; if your spouse wants all or part of that property, you must prove your relative intended it for you alone. In other words, you may need either testimony from this relative or a document, like a letter, a will, or even title, among other things, that shows the gift giver's intent.

You should also be able to keep any increase in the value of a gift or inheritance when your spouse did not contribute to the increase. For example, if your family gave you a security account in your name alone, which increased over time, the entire amount likely remains your separate property. By the same token, if your family gave you a rental property that your spouse helped to maintain and manage, then the rents and any increase in value is probably marital property.

Gifts given between the spouses (called interspousal gifts), like a new minivan for one spouse to use, or money to buy an investment property that one spouse intends to flip, belong to the marriage and can be divided at divorce. This is true even if title is only in one spouse's name. Of course, this doesn't always mean that the two of you will have to sell the minivan, for example, so each of you can take half the money. It means that this car or any other interspousal gift is part of the total amount of marital property that the two of you (or a court) will split up fairly when you divorce.

To learn more about the difference between separate and marital property, read the article New Jersey Divorce: Dividing Property.

Commingling the Gift or Inheritance

Your spouse could acquire an interest in your gift or inheritance if you mix it with other funds (called commingling) that belong to the marriage. Commingling usually changes separate property into marital property that can be divided at divorce.

For example, if you receive a cash inheritance from your grandmother that you place into the joint checking account that you share with your spouse, you are commingling those funds. Although you might be able to reclaim the whole inheritance for yourself through a process called tracing, it's a safer bet to keep the money separate in the first place if you want to keep it for yourself.

Fairness

New Jersey courts use equitable distribution, which is based on fairness, to determine a fair division of property at divorce. Although you may be able to keep your gift or inheritance out of your spouse's hands when a court divides your marital assets, that doesn't mean this separate property is permanently out of reach. A court could order alimony or child support to be paid out of your separate property if it is reasonable and fair to do so. This tends to happen where there are limited marital assets and a specific medical or educational need that can't be met by the marital assets.

Resources

For more on property division and related topics, see New Jersey Divorce & Family Laws.

To read the law on gifts and inheritance at divorce, see the New Jersey Statutes Annotated 2A:34-23.

To read a case where a court found that a gift deposited in a joint back account for only two weeks was still separate property, read Dotsko v. Dotsko, 244.N.J. Super 668 (1990).

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