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How are gifts treated in a divorce?

On Behalf of | Oct 13, 2021 | Property Division

Property division is one of the most complex issues which must be dealt with during a divorce. Assets must be divided into separate and marital property, with marital property subject to equitable distribution between the two spouses. But how are gifts handled? The answer depends on the source of the gift and how the gift is treated after it is given.

Interspousal gifts

Spouses give each other gifts all the time; birthdays, holidays and anniversaries happen every year. As a general rule, New Jersey treats these gifts as marital property, owned by both spouses and subject to the rule of equitable distribution. This does not necessarily mean the gift will have to be sold and divided between the spouses along with other property. Rather, it means the value of the gift will be counted as part of the total assets which must be distributed. If one spouse has a particular emotional attachment to the gift, there’s a good chance they’ll be able to keep it.

Third-party gifts

Gifts given by parties outside the marriage, such as friends or parents, can be either separate property or marital property. If the gift is given to both spouses, with the intent that both spouses share in it, the gift will be classified as marital property. If it is given to an individual spouse, with the intent that it be enjoyed solely by that spouse, the gift will be considered separate property and retained by the spouse who received it.

There are circumstances, however, where a third-party gift, given to an individual spouse, can be transformed into marital property. If the other spouse invests time and resources into using the gift or maintaining/improving its value, these actions could create an interest in the property they did not possess at the time the gift was given. Like many assets which must be divided during a divorce, properly identifying gifts as marital or separate property is a complex process which requires knowledge and experience.