How Court Treats Post Separation Payments, Part 1
Let’s suppose that you provided funds, checks, cash, or other payments to your ex since separation. You have a claim pending for equitable distribution, which seeks to divide your marital property. But court is slow and it can take some time for the court to reach your case. When it does, how should the court treat those payments you made? Were they gifts, or were they something the court ought to consider in equitable distribution?
The leading case in this scenario is Cobb v. Cobb. There, a plaintiff paid roughly $45,000 to defendant after separation. That money was in addition to sums paid to defendant for child support. This means that there was no obligation to give defendant that $45,000. The trial court treated that amount as an advance on the distribution of the marital estate. The defendant appealed and argued that it was error for the trial court to find that the $45,000 was an advance when there was no written agreement that it was such, and when the trial court did not inquire to the purpose of the payments.
However, the court of appeals held that the trial court’s findings indicating that the $45,000 was not a gift were correct. Importantly, for gifts between spouses, often termed interspousal gifts, to become separate property, the recipient must have stated the intention that the gift is separate property at the time of conveyance. In this case, the checking account from which these funds were sourced from was a marital account. No evidence was introduced by defendant to show the court why it should be separate property. Even though the parties have separated, this principle still applies because it would promote a policy where the property-holders are incentivized to hold on to marital property exclusively.
What we learn from Cobb is that, depending on the circumstances, the money given to your ex during the period of separation can be used as a distributional factor – an advance on marital property – as long as there was no statement that the money is meant to be a separate gift. We also learn that these funds were in excess of child support and that there was no post-separation support, alimony, or child support orders at the time of payment, meaning that plaintiff was not required to pay this amount. In this situation, the only category remaining for this credit to apply to was equitable distribution.
All cases are fact specific. Just because your case looks like Cobb does not necessarily mean that it can have the same outcome. Please speak to a family law specialist if you have questions about interspousal gifts and equitable distribution.