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The Divorce Encyclopedia
Third Party Gifts

Term Definition Third Party Gifts - gifts from third parties to a married couple can sometimes become a problem.
Application in Divorce Many equitable distribution states treat property acquired during a marriage from a third party as separate property because gifts, like inheritances and passive appreciation, are not the result of marital efforts by the community of husband and wife.

During the happier times of the marriage, third-party gifts are seldom a problem because no one worries about who owns them. Rufus and Rhonda did not worry much about the ownership of that generous check from his Uncle Elliott (it had both their names of it, didn’t it?), or whether Aunt Maude meant the both of them when she gave Rhonda the antique silverware that had been in the family since the Civil War. Uncle Elliott’s check went into the pool of money, like their savings accounts, and down the road they will use it for their house. And the silverware looked lovely on their dining room table, didn’t it?

When the marriage goes south, however, disputes frequently arise about whether the transfer was in fact a gift, loan, or even something else. In a divorce, courts must determine whether a transfer was a gift, and if a gift, whether it was to one party or both spouses.

In so doing, courts look for what is called a "donative intent"; that is, when the transfer was made, did the donor make "a gratuitous and irrevocable transfer of property." In this, courts may rely on the way the donor reported the transaction to the Internal Revenue Service.

Sometimes, during the stormy times of divorce negotiations, one spouse may claim the money they received (even on a wedding day) was a loan, not a gift. In evaluating this claim, courts rely more of evidence of repayment and documentation, rather than the obviously biased testimony of relatives.

Some states work from a rebuttable presumption that all property acquired during a marriage is marital, but make an exception for gifts. The spouse asserting that the gift is separate property bears the burden of rebutting the marital property presumption.

Depending upon the circumstances, property in one spouse’s name can very well be marital and subject to distribution. Moreover, property can be separate, such as a gift to one spouse from parents, but the appreciation of it marital and subject to distribution.

Marital estates are sometimes complicated when one spouse’s parents help finance the purchase of a house without making it clear that the money is a loan or gift because during happier times, it seems unnecessary, if not unseemly. When one spouse’s parents advance money for a couple to buy a home without making it clear whether the money is a gift to their adult child (and hence separate property) or a joint gift to both spouses (and hence marital property), courts usually rely on the title of the property. This can be further complicated because the gift may be a gift to a son or a daughter -- and hence separate property -- or a gift to both spouses -- and hence marital property.

Deciding whether the gift is separate or martial depends on many factors, including the testimony of the donor and the recipient(s), the titling of the property, the spouses’ relationship to the donor, the history of the property, previous gifts and how the spouses treated the property.

Aunt Maude’s Civil War silverware can be very problematic. In general there are two approaches to the classification of wedding gifts. One is called the New York rule, which presumes that all wedding gifts are joint gifts unless otherwise clearly indicated; the other is the English rule, which holds that if the donor’s intent in ambiguous or unclear, then "all money and gifts coming from family or friends of one spouse belong to that particular spouse."

Courts generally view forgiveness of a debt as a gift to both parties and treat it as marital property.

See also Commingling; Interspousal Gifts; Marital Assets; Real Estate; Transmutation.

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