One of the perks of having wealthy in-laws is the possibility of receiving generous gifts. Depending on the parents' wealth, it's not unheard of for couples to be gifted luxury cars, real estate properties, or incredible amounts of cash. This is all well and good while you're married, but what happens to these gifts in the event of a divorce?
In New Jersey, gifts to and from each other, as well as gifts from third parties that are meant for both spouses, are subject to the laws of equitable distribution. Furthermore, gifts that are given to one spouse, but commingled with marital assets may be subject to equitable distribution. A common example is when one spouse inherits a sum of money, which is then deposited into an account in both spouses' names. At that point, the money is “commingled”, i.e. transformed from a separate asset into a marital asset.
Gifts from generous in-laws, however, are not so obvious in terms of the intended recipient. Things get particularly messy when in-laws adamantly insist in a divorce proceeding that the gift was meant strictly for their child only. Unless the parents can prove this in writing, or some other form of physical evidence, judges typically default to examining how the gifts were used during the course of the marriage. If it's clear that both spouses used and/or benefited from the gifts, it could be seen as a reflection of their marital lifestyle, which may have an effect on alimony. On the bright side, if it can be shown that gifts were meant for only one party, they will be free from equitable distribution.
Another complex situation involves gifts for the grandchildren, especially money that gets put into a savings account for future use. College funds, for example, present the dilemma of whether the money should “come off the top” of what both parents should contribute, or if it should count as going towards one parent's expected contribution. New Jersey courts tend to rule in favor of the first arrangement, meaning that a total amount of expected support will be determined, from which they will deduct the amount that was gifted by the grandparents. The courts will then determine the percentage or portion that should be covered by each parent based on this new amount.
Even if it's determined that a gift is subject to equitable distribution, how to divide it is a separate issue. Specific gifts may be subject to vastly different divisions than the other marital assets, as is often the case with commingled assets. That's why it's important for each spouse to go over a list of all their assets with an experienced attorney; a forensic accountant may be needed, as well. Understanding the nature of your assets under the state's equitable distribution laws is the only way to ensure that you receive a fair settlement. For more information on the distribution of gifts in a divorce, please speak with the attorneys of Villani & DeLuca, P.C.