Times UK ran a report today that essentially suggests that German courts are getting tough on gifts, post divorce. In the case in question, a judge ruled that a portion of the value of a home should be paid back to the in-laws. The son in law basically got the house after the divorce. But when the house was actually purchased, it was the in laws who had loaned given their daughter some money to pay for the downpayment. It was a gift of course, like any other gift given by parents to their children upon marriage. But the German courts are interpreting the gift to be a sort of conditional gift. The condition subsequent being that the marriage will stay in tact. If it doesn’t then the courts are basically saying that they should be their money back. Here’s part of the Times report:
Judges in Berlin yesterday ordered a man who kept the family home to pay back a gift of €29,000 (£25,000) from his in-laws that had helped the couple buy the house.
The ruling by the Federal Court of Justice has been interpreted as a landmark judgment which could allow in-laws to reclaim presents given to their child’s spouse if the marriage breaks down.
Judges said that the “contractual basis” of such presents depended on the in-laws’ child being able to enjoy the fruits of the gift. That basis no longer applied after a divorce. (By Timesonline.co.uk)
I guess the takeaway is that when parents give their kids “gifts” during the marriage, all parties should make sure how the gift is being classified. Is it a gift to the couple? Or is it a gift only to the parents’ child? What are the conditions of the gift? While I’ve never heard of this happening in New York, it is conceivable that a case could have a similar outcome here…. The thing with gifts to one party in a marriage, though, is that once it is “commingled” with marital assets, it stops being the separate property of just that party and becomes the marital property of both parties in the marriage. So it would be difficult for a couple in a case like this to have gotten that money back and I think it conceivably could be a tough argument for the in laws to win.
On the other hand, if the in-laws classified the giving as a “loan” to both parties, then upon divorce, I would think it would be treated like any other marital debt. Even if they classified it as a loan only to their issue, once it was used to purchase the marital residence, it would still be a marital debt and both parties would probably have to split it and pay the parents back. But if it is classified as a “gift” it could be argued that the in-laws are not entitled to any of it back – whether the gift was made to their issue, or to the couple.