Dividing Gifts During a Divorce

What’s Mine is Yours… Or, Is It?

Dividing up gifts during divorce proceedings is not always an easy task.

Amicable Settlements are Best for Both Parties

Divorce is much more than a simple break up. After years of living together and building one life from two, splitting up can come down to splitting hairs over property, money, and personal belongings that each person believes are their own. When it comes to divorce, the three categories of YOURS, MINE, and OURS are not always as easy to define as couples believe.

Gifts received before and during a marriage may become hotly contested items during a divorce — especially when one party believes they are entitled to the gift as marital property. Determining who gets what in hostile divorce proceedings can be difficult and demands intense scrutiny and even evidence.

Unless an amicable settlement can be reached on gifts of both financial and sentimental value, a court will ultimately decide what belongs to whom during a divorce. Relying on legal determinations can sometimes leave both parties disappointed.

“My Uncle Gave ME That!”

In addition to its monetary value, a gift typically carries some personal or sentimental attachment that ties it to one person. Unless a gift is given jointly to two people, it usually is accepted as belonging to one person. However, when couples divorce, gifts are not as easily defined as one person’s property or the other’s.

Gifts received during a marriage include a wide-array of items, from simple trinkets to large sums of money. Examples of gifts may include things like:

• an item — such as a fishing pole or teapot — received for a holiday
• a piece of furniture given by a relative who is moving
• a second-hand automobile
• inherited money or property

In each of these cases, it is easy to say, “Mine!” when it comes time to split. After all, each of these gifts can be given to an individual and originates from a personal or family connection that seems easy to qualify as attaching some form of ownership.

However, each of the items above — no matter how insignificant or personal — carries a potential conflict in determining ownership during a divorce, especially when the parties are hostile to each other. Minor gifts and household items may be used to gain an advantage in negotiations, hurt the other party, or create a delay in proceedings. Even items received as gifts prior to a marriage can be contested, making equalization a prolonged and difficult part of the divorce proceedings.

The Law Determines Ownership

In Canada, the Family Law Act governs how a court will assess ownership of gifts including property, money, and other valuables. Pursuant to equalization guidelines, a court will look to a number of factors in determining where a gift lies in relation to both spouses. While gifts received individually are generally excluded from equalization, how a gift was used during the course of the marriage will affect ownership.

Some gift-related pitfalls to be aware of include:

• An inheritance that is a direct payment from a family member is solely owned as a gift. However, if the receiving partner uses the proceeds of an inheritance to purchase, pay for, or improve a matrimonial home, the value of the gift becomes joint property.
• Likewise, if a gift is deposited in a jointly held account and used for investments, the purchase of a shared vehicle, or other matrimonial improvements, the value is transferred from an individual asset to a jointly held one.
• A gift received prior to marriage that is co-mingled with matrimonial funds and accrues value during the marriage is another area that complicates equalization.

Regardless of who receives the gift and who gives it, the use of the value during the marriage can affect ownership. Sorting out the details is a long and often contested process. Precise record-keeping, separation of gifts and inheritances, and vigilance will make ownership determinations easier, but many couples are not so careful or aware of such necessities until it is too late.

Get Legal Advice Now

When equalization is an issue, call a qualified and experienced family law attorney to assist with the complex and often convoluted determinations that decide who owns what property. Contact Fine & Associates for a consultation today.