Is a Gift from Family “Marital Property”

We are just 2 days away from Halloween when kids all across America will venture out “trick or treating”. If the truth is to be told, I probably went “trick or treating” longer than most. I remember being well into my high school years donning a costume of some sort (“punk rocker” one year, as I recall) and knocking on neighbors’ doors scoring tons of great candy and treats. After my evening of trick or treating was over, my sister and I would dump out our bags and survey our spoils, swapping some goodies for others. For me, I was willing to trade almost anything for Reese’s Peanut Butter Cups! My goodness, it was like a little bit of Heaven dipped in chocolate and wrapped in a gold seal! When I think back on those years it fills me with such joy. But these happy childhood memories would be altogether different if the day after Halloween I awoke to discover that half my candy had been taken from me and given to my sister. Cue the scary music and the shiver-inducing SCREAM!!!

Well it is just this kind of tale of woe that has inspired this week’s question. What if a special treat that was meant just for you somehow overnight becomes a gift that you are forced to share with someone else? You’d be wondering how this horrible injustice happened.

****************************************************************************
Question: If one spouse receives a cash gift from a family member during the marriage is that gift treated as non-marital property under the Maryland Family Law Code?

Answer: It depends. Generally speaking, a gift of cash that one spouse receives from a family member that is made solely to that spouse will be considered non-marital property. However, this non-marital property can be converted into marital property if the giver of the gift and the receiver of the gift are not careful. For example, if the giver of the gift does not make it absolutely clear that the gift is made solely to one spouse (e.g., by writing the check solely in that spouse’s name) there may be an argument as to whether the monies was not intended to be a gift to both spouses. Moreover, the receiver of the gift may muddy the analysis by depositing the funds in a joint bank account. Then a court may wonder whether a “second” gift was made from the spouse who received the gift from his or her family member to that person’s spouse. To make matters worse, if the account into which the money was placed is one in which both spouses deposit their paychecks and other funds that the couple receives, the “gift money” will have commingled with marital money – making it difficult to “trace” the gift (which is claimed to be non-marital) from the other marital funds in the account.

****************************************************************************
I have seen first-hand how clients have inadvertently forfeited their right to hold on to non-marital assets by failing to keep monetary gifts or inheritances separate from marital funds. In several cases, down payments for home purchases were “gifted” by one party’s parents and then placed in joint bank accounts with other household funds until the closing date. In another case, a father of one client provided a loan to the parties to purchase a home. Upon the death of the client’s father several years later the father’s estate forgave the debt of the parties, thereby making a “gift” to both parties rather than a gift or inheritance to his son solely. As you might imagine, it was a bitter pill to swallow for the client whose father’s gift that purchased a lot of equity in the couple’s marital home was shared equally by the father’s soon to be former daughter-in-law.

This Week’s Takeaway: Mind your goodie bags lest you find that you’ve sprung a hole in the bottom and half your treats have been lost.