Are Gifts Subject to Equitable Distribution in a New Jersey Divorce?

Whether or not gifts are subject to equitable distribution during a divorce depends on the specific circumstances of the property transfer and how the item was used. Continue reading for more information and work with a knowledgeable Morristown property distribution attorney today.

What is Equitable Distribution?

Equitable distribution is the legal process in New Jersey of fairly dividing marital assets and liabilities between divorcing spouses. It is important to understand that “equitable” does not necessarily mean “equal.” Instead, the court’s goal is to create a division that is just and fair under the specific circumstances of the marriage.

The first step in equitable distribution is to classify all assets and debts as either “marital” or “separate.” Only marital property (assets acquired by either or both parties during the marriage up to the date the divorce complaint is filed) is subject to division. Separate property, such as assets owned before the marriage or received as an inheritance, is typically exempt.

Once marital property is identified and valued, the court considers a list of statutory factors, as found in N.J.S.A. 2A:34-23.1, to determine the fair split. These factors include the duration of the marriage, the economic circumstances of each party, the financial and non-financial contributions of each party to the marriage, and any written agreements made by the parties, among other things.

What is Legally Considered a Gift?

Legally, a gift is a voluntary transfer of property from one party to another without compensation or expecting anything of value in return. For a gift to be considered valid, three elements must typically apply:

1. Donative intent: The donor must clearly intend to make a transfer of ownership
2. Delivery: The property must be physically or constructively delivered to the donee
3. Acceptance: The donee must accept the gift

Gifts can occur between any individuals or entities, including family members, friends, or even unrelated parties. When it comes to a marriage, gifts can be exchanged between spouses in what is known as an interspousal gift or transfer.

Are Gifts Subject to Equitable Distribution in an NJ Divorce?

In general, property acquired by “gift, devise, or descent” during the marriage is considered separate property and is not subject to equitable distribution. This means a gift received from a third party (like a parent or friend) by only one spouse remains that spouse’s separate asset, given that they can clearly trace and prove it.

However, the answer becomes more complex when dealing with interspousal gifts. New Jersey courts have the ability to treat an interspousal gift as a marital asset, subject to equitable distribution, unless there is clear and convincing evidence that the giving spouse intended to transmute the asset into the separate property of the receiving spouse. If the gift was intended for the benefit of the marriage, it will almost always be divisible.

Even property gifted by a third party can become divisible if it was commingled with marital property, such as cash that was deposited into a joint account or used to benefit the couple. The specific facts surrounding the gift, including its intent and how it was used, are important to the court’s determination.