“What happens to gifts that were received during our marriage” is a question that is often asked early on in a divorce case. The answer can be as varied as the type of gift, from whom it was received as well as to whom the gift was given.
Under New Jersey’s equitable distribution statute, “all property, real, personal or otherwise, legally or beneficially acquired during the marriage by either party by way of gift, devise or bequest shall not be subject to equitable distribution, except that interspousal gifts shall be subject to equitable distribution.”
With this generally means is that gifts between spouses during the marriage (think diamond necklace or Rolex watch for an anniversary gift) will be subject to equitable distribution and therefore included in the marital estate.
Gifts from third parties, however, are different. For instance, if your great aunt gives you a check for $10,000, and you put this into an account with only your name on it, it will be immune from equitable distribution. If, however, you place that $10,000 into an account that also has your spouse’s name on it, you have put it into the pot.
An issue that often comes up is when parents provide gifts to both parties during the marriage, but then at the time of divorce claim that it was only meant for their child. The court will then look at factors such as when was the gift given, how the gift was used (in the case of a monetary gift) and make a determination as to the intent of the donor.
And speaking of grandparents, what about when grandparents, as they often do, start or contribute money to a college fund for the children? In these instances, it has to be determined whether the amount in the college fund comes “off the top” prior to assessing responsibility for college expenses against the parents, or whether it is counted as going towards only one parent’s obligation. Most typically, a court will determine it is the former. This is important to know when parties are involved in divorce proceedings or are contemplating a divorce and grandparents are making regular contributions towards college.
A thornier issue is when one spouse has received substantial gifts throughout the course of the marriage that has impacted on the marital lifestyle. This scenario comes up when a party to the marriage has wealthy family members who give regular gifts which support a standard of living that the parties would have been unable to sustain on their own. We see this in the context of estate planning on the part of parents. While the gifts are certainly not part of the marital estate for purposes of equitable distribution, they can have an impact on support obligations. The courts have consistently held that the correct standard of living in determining amount of alimony was the way the couple actually lived, which may include gifts in addition to earned income.
Remember, however: even if a gift is deemed to be part of the marital estate, it may not be fair or equitable to divide it in the same manner as other marital assets. It is critical to make sure that all of the facts and circumstances surrounding the gift are provided so that a fair resolution can be reached.