Are Gifts Given During The Marriage Marital Property or Separate Property?

Dividing gifts during divorce

During a divorce, you’re more than likely wondering what will happen to your bank account and personal assets, however, gifts are not often considered during the proceedings. What happens to that car or all of that jewelry you were given during the marriage? Who gets to keep them?

The answer is a little complicated.

Gifts from One Spouse to Another

These gifts are considered marital assets during a divorce.

This includes gifts such as the aforementioned cars and jewelry that were given from one spouse to another. However, the law sees certain assets differently depending on when they were given.

For example, an engagement ring given before the marriage is considered a gift outside of the marriage. The only time it can be considered a marital asset is if it’s upgraded or altered during the marriage, which would then make it eligible for a 50/50 split during a divorce.

Kitchen Sink States

In some states, this isn’t true. In Connecticut, Indiana, Kansas, Massachusetts, Michigan, Mississippi, Montana, New Hampshire, North and South Dakota, Oregon, Vermont, Washington, and Wyoming, separate property is roped into the marital estate. This means your private possessions can still be split 50/50!

Dual Classification States

In 29 states, separate property (such as gifts or solely purchased items) is generally not subject to distribution during a divorce.

Circumstantial Inclusions

Alabama, Alaska, Arkansas, Hawaii, Iowa, Minnesota, Ohio, and Wisconsin consider separate property included in the divorce if there is a need for it from the non-entitled spouse.

Joint Ownership of a Car with a Loan

It’s not uncommon for a spouse to surprise their significant other with a car.

Unfortunately, if you took out a loan to pay for it, a judge doesn’t have the power to split this liability. While the primary user will more than likely be granted permanent ownership of the car, the person who took out the loan will still be responsible for the payments.

That doesn’t mean the person making those payments is stuck. In fact, if they stop paying, the car could very well be repossessed. If this happens, the spouse that stopped making payments could be sued, though this route is time consuming, costly, and doesn’t change the fact that money is owed to the creditor.

Items Purchased/Invested in with Jointly Owned Funds

Items purchased jointly are considered marital assets that are subject to division during divorce. If funds exist outside of joint bank accounts, it’s advised that you leave them where they’re at during a divorce. Once the funds hit a joint bank account from a personally owned one, they’re turned into a marital asset, which is subject to being split.

Commingling funds can mean:

  • Inheritance money deposited into a joint bank account
  • Income going to a joint bank account
  • Combining resources to make purchases
  • Any dollars in accounts with both names
  • Both spouses responsible for anything with both names listed (i.e. loans and credit cards)

    This is commonly referred to as transmutation.

    Conclusion

    In many cases involving marital assets and gifts, it’s suggested that you consult with an attorney. It’s entirely possible to complete this process alone, though laws can be very difficult to interpret. Furthermore, should any disagreements arise or emotions get out of control, an attorney will be there to handle the situation and communicate with the other party effectively.

    Sources

    • http://divorcesupport.about.com/od/financialissues/a/Divorce-And-Commingled-Funds.htm