New Jersey Info

New Jersey Divorce Start Your Divorce Find Professionals New Jersey Articles Divorce Facts Divorce Grounds Residency Divorce Laws Mediation/Counseling Divorce Process Legal Separation Annulments Property Division Alimony Child Custody Child Support Divorce Forms Process Service Grandparent Rights Forum New Jersey Products Divorce by County

New Jersey Articles

Agreements Attorney Relationship Custody & Visitation Child Support Collaborative Law Counseling Divorce/General Domestic Abuse Domestic Partnership Financial Planning Foreign Divorce Mediation Parenting Property Division Spousal Support SEE ALL

Info Categories

Contemplating Divorce Children & Divorce Divorce, Dollars & Debt Divorce Laws Divorce Process Divorce Negotiation SEE ALL

More Information

Articles Checklists Research Center Cases of Interest Dictionary Encyclopedia Encyclopedia (pop-up) Blogs

For Professionals

Advertise With Us Free Network Page Join Our Network Submit Articles Sign In

Network Sites

New Jersey Divorce Support New Jersey Divorce Online

Gifts and Loans From Parents in Divorce
Are gifts from parents subject to equitable distribution in a divorce case?

No. N.J.S.A. 2A:34-23 specifically excludes from equitable distribution all gifts received by either spouse from a third party. The third party is in most instances are the parties' parents. However, it is important to note that interspousal gifts are subject to equitable distribution. The burden of proving that an asset is an interspousal gift rests upon the party alleging the status for the property.

Many disputes have arisen over whether a gift from a parent was made to one or to both spouses, or whether a gift to one spouse lost its separate and immune character by virtue of being commingled with marital property, for example by deposit in a joint savings bank account. See, Dotsko v. Dotsko, 224 N.J. Super. 668 (App. Div. 1990).

It is important for any spouse to keep any of their assets that were derived from a gift(s) separate and distinct from the rest of the marital property. Separate property that is brought into the marriage, is not eligible for distribution upon divorce. However, quite frequently the spouses commingle their resources. Consequently, separate property that was a gift is often commingled with marital funds. If this should occur then an argument can be made that the gift was converted into marital property. If this type of situation should occur, then every case is decided on a case by case basis. However, if possible it is always strongly advisable to keep your gifts from your parents and your inheritance separate from your spouse's finances.

My parents gave me $50,000 to use as a down payment on the marital home…

Unfortunately, the marriage was a disaster because my wife is a cheater and a "spendaholic." Is the $50,000 gift from my parents subject to equitable distribution?

This type of scenario also occurs very frequently. Parents often are very generous with their children at the wedding day or in the newlywed years. The parents want their children to get their marriage off to a good start. A generous check often can be used as a down payment to purchase a new home for the newlyweds. Moreover, in many cases the parents will gift lots of land to their child and to his or her future spouse. The parents have visions of a happy marriage and of many happy and healthy grandchildren. If this vision "pans out" then the gifts were worth it in the eyes of the parents.

Unfortunately, in many instances marriages turn out to be disasters. Once a marriage ends, then quite often the in-laws will then contend that the gift was only made to their child. Alternatively, the in-laws could maintain that the gift was instead only a loan. The black letter law on this type of situation is that a gift by a third party (usually an in-law) to both spouses, typically the down payment on their house is subject to equitable distribution. However, the fact that the gift was made by the parents of one spouse is a factor that the court may take into consideration when it decides on equitable distribution. Nonetheless, the asset is still subject to equitable distribution. There is no definitive answer to this type of family law scenario. Most courts will analyze this type of fact pattern on a case by case basis.

The equitable maxim that gifts given in good times cannot be taken back in bad time often applies. Unfortunately, in most cases there is no writing or contract to corroborate the fact that the parties and the generous parents viewed the money as a loan, say of a down payment on a house, at the time when it was made. Once the marriage breaks down, then the other spouse claims that it was a gift. If any loans are ever made by parents to a child and their spouse, then it should be carefully documented so that there can be no dispute in the future. If the monies advanced were a loan made to both spouses, then it is a marital debt that should be repaid. The best evidence that it was a loan would be a promissory note that is given by both parties. But other evidence may be sufficient, such as canceled checks by the spouses to the parents of a period of time that indicates repayment of a loan.

In summary, if a spouse is making a significant down payment that consists of a gift from a parent(s), then it is always advisable to have a basic prenuptial agreement prepared. This issue frequently arises when one set of in-laws provides the funds to pay for the down payment for a marital home. A prenuptial agreement can provide that the in-laws shall receive their contribution back if the marriage is terminated, and if the marital home is then sold.

What is the legal standard of law that a court must use to consider whether funds from parents are a gift or a loan?

To determine whether funds given from parents are a gift or a loan a court must consider the tests for each. A valid gift must contain the following three elements:

  • The donor must perform an act which constitutes an actual or symbolic delivery of the subject matter of the gift.
  • The donor must have the intention to make a gift.
  • The donee must accept the gift and the donor must relinquish ownership and dominion over the subject matter of the gift as much as is practical or possible.

The most important element is the donor's intent. The donor or the parent must intend to make a gift.

What is the legal standard that the court uses to determine if funds given from a parent to their child and his spouse are a marital debt?

For parents to succeed on a claim that the money they lent to their child and to the child's spouse is a marital debt, then they must satisfy a two-pronged test:

  • The lender (the parents) advanced money to the borrower (the child and/or spouse); and
  • There is an agreement for repayment which includes terms such as interest and when payments are due.

In most family court cases it is rare for family members to have loan contracts. Therefore, the next question is whether there is any supporting documentation or any other evidence of repayment to support that the advancement of funds was a loan. Canceled checks that note the repayment of interest or principle may be conclusive proof that the funds advances were indeed a loan.

My parents lent me $50,000 to purchase a new house…

How can I ensure that my parents will be repaid these monies if I should ever get divorced?

Parents should always document any and all loans that they make to their children. These loans should be in writing. There are countless forms for promissory notes on the internet. Moreover, simple promissory notes can also be purchased at Staples. The documentation does not have to be overwhelming or be a "book." Instead, parents simply must obtain clear and conclusive "paper proof" that any monies they lent to their child and his or her spouse is a loan and not a gift. The simple task of documenting a loan can avoid thousands of dollars in litigation costs if the parties ultimately divorce. The more time that passes after a gift or loan is made to children, then it is much more difficult for a court to ascertain the parent's intentions, and it is harder to obtain the needed documentation.

Was this helpful? Like our site & let us know.

Related Articles

Start New Jersey Divorce Start Your New Jersey Online Divorce Today
Easy, Fast and Affordable with a 100% Guarantee.
New Jersey Divorce Find New Jersey Divorce Professionals in Your Area:
Join the Network
New Jersey Divorce Products, Services and Solutions New Jersey Divorce Products, Services and Solutions
New Jersey Divorce Resources to Help You Through the Process.
Online Parenting Class New Jersey Mandatory Online Parenting Class
Easy and convenient - complete at your own pace online.
Divorce and Custody Books Discount Divorce Bookstore
Over 100 Titles of the Best Books on Divorce & Custody.
Divorce Downloads Divorce Download Center
Instantly Download, Books, Manuals, & Forms.
Divorce Worksheet Free New Jersey Divorce Worksheet & Separation Agreement
Your Guide to Get Organized and Put Everything in Writing.
To file for divorce in New Jersey under no-fault grounds, the couple must have been living separate and apart in different residences for at least 18 consecutive months. There must be no hope of reconciliation in the marriage.
Divorce Lawyers & Mediators

Find Professionals

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:


Start Your Divorce File for a New Jersey Divorce


Settle Your Divorce Negotiate Your New Jersey Divorce


Support Forum New Jersey Support Forum

Guarantee Official PayPal Seal Facebook Twitter Versign Secure Site
Limited Offer Women's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"The Absolute Best Investment in Your Divorce"

Men's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"Uncover Your Options and Unleash Solutions"