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GIFT TO SPOUSES FROM THIRD PARTY CLASSIFICATION AND DISTRIBUTION
© 1996 National Legal Research Group, Inc.
MINNESOTA: Olsen v. Olsen, 552 N.W.2d 290 (Minn. Ct. App. 1996).
Real property which was conveyed to the parties as joint tenants by the wife's uncle was marital property.
WEST VIRGINIA: Pratt v. Pratt, ___ W. Va. ___, 475 S.E.2d 102 (1996).
The trial court erred in departing from the presumption of equal division for the parties' marital home, which had been purchased with funds gifted to the parties jointly by the wife's father.
Both of these cases involved a dispute over property given to both spouses by a relative of one spouse. In both cases, the spouse whose relative made the gift prevailed at the trial level, but lost on appeal.
Classification of Property Given to Both Spouses. The decision in Olsen v. Olsen will make it difficult in Minnesota to rebut the presumption of marital property for gifts to spouses in their joint names. Elsewhere, the decision could be cited as persuasive authority in dual classification jurisdictions with a marital property presumption on behalf of a spouse seeking to include jointly titled gifted property in the marital estate. In response, the spouse seeking nonmarital classification could cite the dissenting opinion in this case.
In Olson, the wife's uncle conveyed undeveloped real property on Lake Superior to the parties as joint tenants in two conveyances in 1989 and 1990. In their subsequent divorce proceedings, the husband took the position that the property was a marital asset. The wife, however, claimed that the property was a gift to her only, and should thus be classified as her nonmarital property. The evidence showed that the property had belonged to members of the wife's family since 1880. The wife's uncle testified that he intended to keep the property in the wife's family, that he had no knowledge of any marital problems between the parties, and that he had a close relationship with the wife but did not know the husband very well. The trial court determined that the disputed property was the wife's nonmarital property because the uncle's intent was to transfer the property to the wife alone, notwithstanding the form of title.
The husband appealed, emphasizing that the uncle's tax returns showed a gift to each party of a one-half interest in the property. The uncle acknowledged his understanding that the property was conveyed to both parties as joint tenants, and acknowledged that he knew the husband would not only be a co-owner after the transfer but also that the husband could end up owning the entire property in his own name if the wife predeceased him.
The Minnesota Court of Appeals held that the wife had failed to rebut the statutory presumption that the property was marital. A spouse claiming that property is nonmarital must prove the necessary underlying facts by a preponderance of the evidence, and the wife had failed to do so, the court explained.
The court started with the general proposition that evidence regarding the intent of the donor is relevant to the determination of whether the gift was made to one but not to the other spouse. Moving on to the specifics, however, the court noted that the conveyance of the disputed property to the parties as joint tenants constituted strong evidence of the uncle's intent to give the property to both parties. The designation of both parties as recipients of the gift on the uncle's tax return further corroborated the unambiguous wording of the deed. The uncle had the right to give the property to the wife alone, but he chose not to do so, the court said.
The evidence showed, the court continued, that the uncle split the gift for his own benefit when his accountant advised him that it would be to his tax advantage to gift the property to both the husband and the wife. The wife argued that the uncle's consultation with a tax expert detracted from the significance of the joint titling, but the court concluded the opposite. "When a lay person searches out a professional, skilled in the preparation of legal documents, such as a tax accountant or an attorney, the fact that the legal document was prepared by a professional pursuant to the instructions of a client does not denigrate the importance of the document as the client's intent, but to the contrary, enhances it." 552 N.W.2d at 292.
The wife also argued that the form of ownership is not necessarily dispositive of the property's marital or nonmarital nature. That generalized proposition "proves nothing until the underlying facts of the case are examined," the court responded. Id. at 293. The court's review of cases invoking that proposition showed that most of them involved a tracing problem, where property that was concededly nonmarital at one time had been mixed with marital property or titled as joint property. The proposition "was never meant to be read as a statement that the form of the deed or the fact of being the title owner of record is meaningless. The form of a recorded deed is always strong evidence of the identity of the transferee owner(s)." Id.
The court emphasized that its decision in this case left the door open for legitimate tracing problems, which can arise when property that was once nonmarital has acquired some aspects of being marital. Here, the court said, there was no tracing problem because the real estate was never nonmarital property. Family law courts have the power to trace nonmarital assets to the true owner but "do not have the power to summarily confiscate property from a true owner, and give it to somebody else merely because the donor has a change of heart, after the fact, and years down the road." Id.
The record here was devoid of evidence that the couple ever treated the property as anything but jointly owned property after the transfer, the court observed. For example, the record did not show that the wife tried to induce the husband to transfer his interest to her so that the property would be in her name alone. It was only when the marriage started to fail, years after the transfer, that the wife began to indulge in the predictable soul-searching that led to her insistence that the property was hers alone, the court said.
The trial court relied on the fact that the property had been in the wife's family for many years and that the uncle had a close relationship with the wife but not with the husband. The appeals court rejected that reasoning. "Common sense tells us that the mere fact that property had previously belonged to one side of the family or the other is virtually meaningless." Id. at 294. By definition, the court pointed out, every gift from one spouse's relative during a marriage always comes from the husband's side or the wife's side of the family. Hence, "[e]vidence that the property in question previously belonged to one side of the family, or that the donor knew one of the joint tenants better than the other, without more, is insufficient as a matter of law to overcome the clear statutory presumption that property given by name and identification to both husband and wife during marriage is marital." Id.
Accordingly, the appeals court reversed the determination that the property was nonmarital. As it remanded for the trial court to distribute the property, the court noted that the trial court is not required to divide marital property equally between parties and need only make a just and equitable division.
In a dissenting opinion, one judge contended that the property's classification as nonmarital should not be disturbed, since it was the trial court's function to weigh the conflicting evidence on the issue of intent. The conveyance to the parties as joint tenants and the designation of both parties as recipients for gift tax purposes did not constitute conclusive evidence of the donor's intent, the dissent argued.
Equal Division Presumption Applied to Property Given to Both Spouses. In Pratt v. Pratt, the dispute centered on the marital home, which had been purchased with funds from the wife's father in the form of a joint check to the parties for $299,000. The check was deposited in the parties' joint account and used to purchase the home in the parties' joint names. Because the parties titled the home in joint names, the home was marital property under West Virginia law when the parties separated after four years of marriage.
The West Virginia statute requires an equal division of marital property except in enumerated circumstances, but the family law master held that the entire marital home should be awarded to the wife. The master reasoned that the specific statutory factors permitting deviation from an equal division were not exhaustive and that a gift from the parents of one of the parties was an additional factor that may be considered when determining whether to depart from an equal division. The master justified the decision by pointing out that the statute prefaces the list of statutory factors that may warrant an unequal division with the phrase "including, but not limited to." That phrase recognizes that unforeseen circumstances could potentially trigger the discretion to distribute marital property unequally to obtain an equitable distribution, the master reasoned.
However, West Virginia's high court held that the marital home should have been divided equally between the parties, pursuant to the statutory presumption of equal division. An order deviating from an equal division must make specific reference to factors enumerated in the statute, the court declared. The statutory phrase "not limited to" certainly implies some discretion, but the circumstances here did not compel departure from the presumption of equality in distribution. The gift here was unquestionably a gift to both parties, was deposited into a joint account, and was utilized for the purchase of a jointly titled marital home, the court emphasized. Under these circumstances, the unequal division of the marital home was error. Had the check from the wife's father been written only to the wife, she would have had a stronger position, the court noted.
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