Gifts: Not a problem during the happier times

Presents and gifts between spouses are interspousal gifts, and during the unhappy times of divorce, courts struggle to determine whether the conveyance happened as a contract or a gift, and if it is a gift, whether it is marital (a “gift to the marriage”) or separate property.

Sometimes assets are conveyed when spouses enter into what are termed midnuptial or postnuptial agreements, either implied or written. Contract law generally governs these agreements, and they happen for a number of reasons, including tax and estate planning.

If the conveyance is not a contract, then the courts consider it a gift under the common-law definition of a gift, which means there must be intent on the part of the donor, delivery and acceptance by the recipient. When the property is transferred into one name alone, the burden of proof is on the person who claims that the intent is present — the recipient.

When property is transferred into joint names (as it often does in real estate and accounts for its acquisition and improvement), the joint title gift presumption very often comes to the fore. This places the burden of proof on the party who claims the transfer was not a gift. Disposition of interspousal gifts turns on whether a gift is a gift to the marriage or a gift to a spouse. Gifts to the marriage are marital property; gifts from one spouse to the other are generally separate property. If John gave Ginny a five-caret diamond as a present during happier times of the marriage, he may argue that the ring is an investment, and therefore, marital property; Ginny may contend that the gift is her separate property.

Gifts between spouses are subject to distribution in divorce, and they can become problematic depending upon the jurisdiction of the action. States are either community property or equitable distribution jurisdictions, and this can affect the way gifts between spouses are treated.

Generally gifts between spouses made during the marriage are subject to distribution because they come to be seen a marital property. When couples marry very often separate property becomes marital property. If one spouse owns a home before he marries and adds his wife to the deed after they married by selling her the house for a dollar, he made what is termed a “presumptive gift” to the marriage, turning the homestead into marital property. This means that the ownership is 100 percent marital property, not 50 percent each spouse.

In most jurisdictions, that symbol of hope and dreams — the wife’s engagement ring, sometimes the first “large” purchase a couple make together — remains the separate property of the wife.

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