Equitable Distribution and Donative Intent

Consider the following hypothetical. Jack buys a home prior to his marriage to Jill. After their marriage, Jack and Jill decide that they want to share their assets and property, so the couple opens joint bank accounts, consolidate their finances, Jack deeds the home he purchased into both his and Jill’s names and Jill moves in with Jack. But over time, the couple become unhappy and they file for a divorce. The question then becomes what happens to the home? Does Jack get to keep all of the home’s equity because it was his property prior to the marriage? Or does Jill receive an equitable share of the property because Jack deeded her the house?

Section 20-107.3 of the Virginia Code purports to provide the answers to these questions. Section 20-107(3)(A)(1) starts with the idea that the home was initially Jack’s separate property because he purchased it before his marriage to Jill. However, Section 20-107.3(A)(2) alters this presumption by providing a definition of marital property to include all property titled in the names of both spouses, except as provided in subsection A (3). Under subsection A (3)—specifically Section 20-107.3(A)(3)(f)—the retitling of separate property into the names of both spouses (here, Jack’s retitling of the home into both his and Jill’s names) transforms the property into marital property. “However, to the extent the property is retraceable by a preponderance of the evidence and was not a gift, the retitled property” can still be considered Jack’s separate property for the purposes of dividing assets.

So, according the the above statutory definitions, the question becomes whether Jack’s retitling of the home was a gift to Jill, or not? If it was a gift, then the home will be considered marital property and both Jack and Jill will share in the home’s equity. If the home was not a gift, then only Jack will retain the home’s equity. This seems pretty simple, right? Clearly the home was a gift from Jack to Jill, as he wanted her to share in the home by moving Jill in and retitling the property. What could Jack possible do or say to prove that the home was not a gift?

Well, under Virginia law, these are not the questions that need to be asked. Rather, in order for Jill to share in the home’s equity, Jill must show that the home was a gift by proving Jack’s donative intent. In other words, the burden is on Jill to prove that Jack’s retitling of the property was intended to be a gift.

In the example of Jack and Jill, Jill will have to offer circumstantial evidence of Jack’s donative intent. “Jack never said he was giving me an interest in the house, but he did say he loved me, moved me into the house and called it ours.” And, it forces Jack to admit that he’s not the nice, loving man that Jill thought he was; and that by retitling the property, he was simply being underhanded.

The 2014 case of Parsons v. Parsons out of the Virginia Court of Appeals demonstrates this issue perfectly. In that case, the husband had inherited a number of investment properties from his mom, and his brother was the executor of the mom’s estate. At the husband’s request, the brother distributed certain properties to the husband and his wife as tenants by the entirety. The husband and wife then transferred these properties to their own, separate trust and managed the trust together as well as shared in the income earned by the properties.

When the husband and wife decided to divorce, the husband claimed that he never intended to gift these properties to his wife. Rather, the husband put on testimony that the only reason he retitled the properties was to avoid creditors.

On the other hand, the wife testified that of course these properties were intended as a gift to her, and should be deemed marital property. The wife testified that the husband intended to share the properties with her, that he wanted the wife to share in the management of the properties and that she did, in fact, manage the properties. The wife also claimed that the husband never told her about avoiding creditors.

After the trial court ruled in favor of the wife, finding that the properties were in deed gifts, the Virginia Court of Appeals affirmed. The Court did not buy the husband’s excuse that he was attempting to avoid creditors, particularly because the husband did not offer any evidence that he had judgments against him. In addition, the Court found that the wife produced sufficient evidence of the husband’s donative intent. The record showed that the husband was generous to the wife and her daughter throughout the marriage, that the husband never made the wife sign a prenuptial agreement, that the wife was given signature authority on all of the bank accounts and was allowed to spend the couple’s money in whatever manner she wished. Moreover, the fact that the husband had the investment properties conveyed to him and his wife as tenants by the entirety showed the husband’s intent that the wife share in the proceeds from the property.

As you can see, how you title property and your intentions in retitling separate property during marriage can have a great impact on how this property will be divided in divorce. If you are going through a divorce, have issues of property division or any other family law matter, contact our experienced DiPietro Family Law Attorneys today at (888) 530-4374 to schedule a consultation. We can provide compassionate, strategic help throughout the process and give you peace of mind that your assets and interests will be protected.

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