Gifts And The Division Of Property
Gifts, Divorce, and The Division of Property in Illinois
Our clients frequently ask us how their property will be divided in their divorce. People grow attached to certain possessions and worry that splitting with their spouse will force them to split with their valuables.
We have previously discussed property division, but the topic is quite nuanced. One of those nuances concerns gifts. Before we begin the discussion, we should address the notion of “estates.” Everything a married couple owns can be categorized in one of three ways: as marital property; as the husband’s property; or as the wife’s property. Marital property is said to belong to the “marital estate,” while the husband and wife’s non-marital property would belong to the “husband’s non-marital estate” and the “wife’s non-marital estate,” respectively. This same concept applies to civil unions, although the terminology would be different.
Section 503(a) of the Illinois Marriage and Dissolution of Marriage Act states that marital property includes “all property acquired by either spouse subsequent to the marriage” with a few exceptions. One of those exceptions is “property acquired by gift, legacy or descent.”
While the issue is a bit more complicated, in its simplest manifestation, property given to a spouse during the course of a marriage is presumed to be a “gift” and will likely not be included in the marital estate.
Before we get into some more of the legal complexities, let’s first discuss some common scenarios.
What happens if you give your spouse the world’s nicest (and most expensive) car only to wake up to a Petition for Dissolution of Marriage the next day? Can you take the car back? Will it be divided as marital property or is it hers to keep?
In Illinois, a presumption exists that when property is transferred from one spouse to another, it is a gift and considered non-marital property. Courts look to the nature and intent of the transfer to determine whether it was in fact a gift.
“Interspousal gifts are possible under section 503(a)(1) of the Act [citation omitted] but the gift must be proven by clear, convincing, and unmistakable evidence to overcome the presumption that all property acquired subsequent to the marriage is marital.” In re Marriage of Weiler, 258 Ill.App.3d 454, 463 (5th Dist. 1994).
Why is there such a high standard for establishing interspousal gifts? Because Illinois law starts with the presumption that anything obtained after the marriage is marital property. This presumption is in place to protect disadvantaged spouses who may not have the financial resources of their husband or wife or who may have done a lot of gift giving under the presumption that the property would be accessible to the whole family.
Clear, convincing, and unmistakable evidence will be case-specific, but courts will generally want some sort of demonstration that the property was intended as a gift. Intent speaks to the state of mind of the giver so, while explicit notes and engravings would be helpful, a court may also consider things like the date of transfer (birthday, holidays, etc.) as well as other indicators that the property was intended as a gift (jewelry, personal objects, etc.).
Another way to address this issue is with a post-nuptial agreement. If the transferred property was not intended as a gift, a post-nuptial agreement can explicitly express the parties’ intent, which will come in handy if they later divorce.
Gifts to Both Spouses
Gifts to both spouses during marriage can also create confusion as it is not always clear who was the intended gift recipient.
A common example of this occurs when a parent or grandparent of one spouse gives a gift during the course of the marriage. Before marriage, a transfer of property from parent to child is presumed to be a gift to that child. However, when a similar transfer occurs during the course of a marriage, the trial court is free to resolve, on the facts, the issue of whether the property acquired by the transaction was non-marital or marital. Or, in other words, was the gift intended for both the child and the spouse, or for the child alone? Again, the court will consider the intent of the giving party and any additional indicators as to who was the intended recipient.
Engagement Rings and Divorce
When things fall apart and an engagement breaks off, it is not uncommon for controversy to arise over which party has the legal right to the engagement ring. In determining the rightful owner of the ring, Illinois courts look to who ended the engagement.
If the woman breaks the engagement, she is required to return the ring. The reasoning behind this policy is simple: the law rests on the notion that a gift given in contemplation of marriage is conditional on the subsequent marriage of the parties, and the party who breaks the condition has no right to any property acquired under such pretenses. Similarly, if the engagement is “mutually broken,” the ring must be returned. Things aren’t so clear when the man breaks off the engagement. While Illinois courts have not decided whether the ring must be returned, the majority view has been that the woman is entitled to keep the ring if the man gets cold feet.
In a dissolution of marriage action, however, the wife will probably get to keep the engagement ring. The gift was given to her in contemplation of marriage and the marriage occurred. In a dissolution of marriage proceeding, courts typically consider the engagement ring to be a gift and the wife’s non-marital property.
Gifts, Dissolution, and Civil Unions
In Illinois, civil unions are governed by the same set of laws as for married couples. That means the above discussion is applicable to civil union couples. While courts have not had the opportunity to extend the case law, the Illinois Religious Freedom Protection and Civil Union Act explicitly provides couples in civil unions with the same “responsibilities, protections, and benefits afforded or recognized by the law of Illinois to spouses.”
Prenuptial and Post-Nuptial Agreements
The nuances around gift giving before and during marriage are examples of the complexities of property division. Such complexities are the most compelling reasons to enter into a prenuptial or post-nuptial agreement.
* If you know how you want certain property to be divided, such as gifts from one party to the other, memorialize it in an official and enforceable writing. Divorce is an emotional affair, and it is often better to decide important issues prior to a dissolution. Even if you’ve discussed the matter with your spouse or partner, a prenuptial or post-nuptial agreement is a way to protect your interests.
* While prenuptial agreements and post-nuptial agreements have become more common in recent years, vestiges of their prior stigma are still visible. Prenuptial and post-nuptial agreements are like insurance policies in that they require an upfront cost, will save you money in the event of an unexpected and unfortunate event, and no one ever plans on using them. In the event of a divorce, the agreement will help you and your attorney quickly address significant issues, including the complex division of property and custody issues. This will reduce uncertainty and your legal fees. Last, a prenuptial agreement is not a sign that you expect your marriage to fail, just like catastrophic health insurance is not a sign that you expect to become severely ill.