If you were lucky enough to receive a particularly high-value gift over the holiday season, and you are also married or soon-to-be-married, then you may want to take a moment to consider the ownership of that gift. While no one wants to think about the possibility of divorce during happy times, those happy times often present the best opportunity for planning. Financial preparedness is like insurance—if you wait to think about it until you need it, you could be too late.
So what are the rules in New Jersey regarding gifts and divorce?
A gift is usually some type of property. With few exceptions, property accumulated before marriage remains the “separate property” of one spouse or the other, but property accumulated during a marriage, regardless of title, is “marital property,” meaning that it belongs to both spouses. Even during marriage, however, property that one spouse inherits or receives as a gift from a third party belongs only to that spouse—provided that the spouse keeps it separate and does not either “commingle” it or “transmute” it.
Separate property is “commingled” when mixed with marital property. For example, if one spouse deposits separately owned funds into a joint account during marriage, it may become difficult to trace the source of those funds, causing them to lose their separate nature. “Transmutation” is common with titled property. For example, in New Jersey, a spouse can transmute a separately owned home into marital property by changing the title to include both spouses as “tenants by the entireties.”
With gifts, a more common problem than either commingling or transmutation may be disagreement about the original nature of the gift. Couples may disagree about whether something was given to one of them or both of them, or whether something was even a gift at all or was rather meant to be a loan. Confusion is particularly common when the parents of one spouse contribute money, either to help the couple out of a tough financial situation or to help them achieve a goal they might otherwise not be able to reach (such as making the down payment on a home). If the contribution was clearly a gift, and there is no evidence that it was made separately to one spouse, a court would generally consider it to be marital property. On the other hand, if the parents intended the contribution to be a loan that both spouses were responsible for repaying, and one spouse (generally the spouse who is not the child of the contributing parents) claims at the time of a divorce that the contribution was a gift, the other spouse would need evidence like a promissory note, or at least a record of partial repayment, to prove that it was actually a loan.
With respect to other kinds of valuable gifts you might receive individually from third parties during marriage, such as antiques, artwork, or jewelry, you will need documentation of the separate nature of the gift if you ever get a divorce. So keep the card or the gift tag, along with a photograph of the gift and a note indicating what the gift was, as well as when and from whom you received it.
What about an expensive gift from your spouse? The key here is that your spouse is not a “third party.” While your spouse’s intention may have been to gift that beautiful diamond necklace to you alone, unless you both make that clear in a postnuptial agreement, it legally belongs to both of you. Unlike gifts from third parties, a gift from one spouse to the other is a marital asset and the value will be divided in divorce.
What if your sweetheart surprised you over the holidays with an engagement ring? In that case the ring is yours alone—as long as you actually get married. New Jersey courts consider an engagement ring to be a type of conditional gift that remains the separate property of the recipient in the event of a divorce. If the condition of the marriage never happens, however, then ownership of the ring returns to the donor.
Do you have a dispute with your spouse about whether an item of value is separate or marital property? Our experienced family law attorneys can help you sort out all of your equitable distribution issues. Contact us today for an initial consultation.