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Are Gifts to a Spouse Still Considered to be Marital Property?

The attorney you retain makes a big difference in many divorce cases.  I have seen this repeatedly, as I am often the second or third attorney on a case trying to fix the mess that preceded me.  One of the reasons:  the law is complicated and not as straightforward as it looks on the surface.

Today’s discussion is whether or not a gift from one spouse to the other spouse (an interspousal gift) transforms the gift into non-marital property. If it is deemed non-marital, Georgia court cannot divide it during divorce proceedings, but what if it remains marital in character?

On the surface, with a quick read of McArthur v. MacArthur, 256 Ga. 762,  you might conclude that is an easy question to answer.  If the property was originally marital property but titled in only one spouse’s name, then if the spouse gifts this property to the other spouse (in this case the marital home) the court held the property remains marital property despite the exclusion of gifts pursuant to O.C.G.A. 19-3-9 from being distributed as equitable distribution in a Georgia divorce.  Case closed.  Right?

The Georgia Supreme Court in Lerch v. Lerch even said as much when a spouse gifted a home he owned prior to marriage to both himself and his wife in joint names.  The Georgia legislature passed a statute that presumes such a transaction commutes what would have been a pre-marital interest in the property into a marital interest.  And many a spouse has been surprised by this at the time of divorce.  So case closed again, right?

Not so fast.  The law is seldom that simple and that is why the lawyer you retain can make a very real difference.  Sometimes a life changing difference.

Premarital funds used to buy jointly-owned property

The situation: My client (the wife) liquidated stock she owned prior to the marriage to use as a down payment. The stock was a gift from her parents. The house was purchased in the joint names of the spouses.

At trial, the opposing attorney attempted to apply the Lerch decision, claiming that the home was marital property. Case closed (from their point of view).

Except the nuances matter.  Unlike the case in Lerch, this was not property that was owned by the wife prior to marriage and then transferred into joint names.  No transfer from wife to husband happened.  Instead the title was simply bought in joint names using the wife’s premarital funds from the sale of stock as the down payment.  Under O.C.G.A. 44-5-80 no evidence of donative intent was presented by the husband to evidence that the wife intended to gift her pre-marital interest to her husband.  Since there was no transfer from wife to husband Lerch did not apply.  And since the husband did not prove a donative intent that the pre-marital stock money was a gift McArthur did not apply.  My client got to keep not only the stock money but got credit for appreciation.  The prior attorney in this case did not recognize the nuance of the law and wanted to settle the case without giving the wife credit for her pre-marital stock money.

Inherited money deposited directly to a joint account

In another recent case we handled, the wife inherited money but the money went into a joint account (in this case $90,000).  The husband’s attorney claimed it was a gift as it went into the joint account and cited the same McArthur case.  This $90,000 was used as a down payment on a condominium in Canada.  The condominium appreciated in value so that with appreciation that $90,000 would be worth $300,000 to the wife in the divorce. 

Again, the prior attorney in this case did not recognize the nuance of the law.  We were able to follow the money trail to categorize and segregate the pre-marital money in the joint account, and we forced the husband to prove the donative intent that the inherited money was intended as a gift to him.  After all, the wife did place it in a joint account, and then the money was used to buy a condominium in joint names.  The preceding counsel overlooked Stewart v. Stewart, 228 Ga. 517, which held that simply depositing money into a joint account, by itself, is not such a surrender of dominion over the funds as to satisfy the delivery requirement in making a valid gift under O.C.G.A. 44-5-80.

This sort of thing happens often, because it is rare for a newly wedded wife or husband to stop and consider what moving money into a joint account could signify.  Sometimes it is straightforward, and money turns out to be a gift.  But often the nuances of the law are ignored, and the legal precedence and statutes not followed or researched. 

As you can see, the attorney you retain does make a real difference.

Scott Shaw is founder and principal of Shaw Law Firm PC, founded in 1995 and dedicated solely to divorce, family law and child custody matters that must be addressed and decided in the state of Georgia. Shaw Law Firm has offices in Dunwoody/Sandy Springs and serves the greater Metro Atlanta area, particularly the counties of Fulton, DeKalb, Gwinnett, Cobb, Cherokee, Forsyth, Paulding, Henry, Fayette, Coweta, Newton, Walton, Bartow and Douglas. Schedule a consultation today or call us at 770-594-8309.