>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.
Continue Reading A Loan by Any Other Name Is a… Gift… To Be Shared