>Often times, when I meet with a new client, they will tell me that a parent, a sibling, great aunt, or good friend loaned the client and the spouse money that must be considered a debt to be repaid in equitable distribution. Many times, this was for a down payment for a house, or to get the couple through difficult financial period. The other party, just as often, takes the position that the “ loan” was really a gift. And so the games begin.

Generally, in the law, a gift has several elements. First the he donor must perform some act constituting the actual or symbolic delivery of the gift. Second, the donor must possess the intent to give. Third, the donee must accept the gift. There us also an additional element, which is the relinquishment by the donor "of ownership of the gift. A loan, on the other hand, is generally defined as The giving or granting of something, particularly a sum of money, to another, with the expectation that it will be repaid (typically with interest) or returned.

When comparing these in the context of a divorce, several questions come to mind. First, if the money was given when the parties purchased a home, was there a “gift letter.” This is very often required by the banks in order to make sure that the money is not a loan. If there is such a gift letter, this is often the end of the inquiry. On the other hand, if there are periodic payments to the person who gave the parties the money, then it may in fact be considered a loan for purposes of distribution. 

Bank records, documents, including emails and letters which memorialize the character of the payment can all be important when determining the nature of such a payment. Cancelled checks can also be critical, as the writer of the check may have written something in the “memo”section of the check. For instance, the words, “Anniversary gift to John and Jane” would seem to dispose of the issue.


Indirect payments can also be important. For example, sometimes a sibling will pay a debt by a credit card, or incur a debt for the couple. So if the couple has regular payments to a third party credit card, that can certainly indicate a loan as opposed to a gift.


In the absence of some type of proof that a payment was to be loan, it can be very difficult to establish that a payment was not a gift. Even if a payment is to be considered a gift, that does not always mean that it will be distributed equally, For instance, if the Wife’s dad gives the parties $100,000 towards a down payment of a home six months before the marital break up, there is certainly a healthy argument that the Wife should get more of the equity. These are hot button issues in divorce cases and they are very fact sensitive. It is important to discuss the circumstances with a lawyer so that a litigant understands the likely disposition.