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Mother-In-Law’s Generosity Complicates Parties’ Divorce


Personal finance advice columnists will tell you that lending money to family members is a recipe for family conflict as well as for financial stress.  The only thing worse than lending money to a family member is giving a family member a substantial sum of money and leaving things ambiguous as to whether the money was a gift or a loan.  Generosity from elderly parents, in the absence of specific instructions about repayment, has led to many probate cases that caused irreparable rifts between siblings; imagine what it can do in divorce cases, where the court scrutinizes every financial decision you and your spouse ever made jointly or separately.  During divorce cases, even the ones that do not go to trial, the court must divide all marital assets and marital debts.  Under Florida’s equitable distribution laws, the court does not always divide the assets and debts equally; instead, it decides on a case-by-case basis the fairest way to divide them.  If gifts or loans from family members are making your divorce case more complicated, contact a Boca Raton divorce lawyer.

Do the Parties Have to Repay the Husband’s Mother or Just Divide Her Gift Between Themselves?

While things were still going well in their marriage, Dennis and Cynthia bought a condominium as an investment.  Dennis’s mother gave them $125,000 toward the down payment on the condo.  The parties signed a promissory note when Dennis’s mother gave them the money, and after they closed on the purchase of the condo, they began paying installments to her.  Dennis and Cynthia later sold the condo at a profit.

When Dennis and Cynthia separated, the parties stopped making payments to Dennis’s mother; the appeals court’s decision does not indicate how much they still owed when the parties filed for divorce.  When the case went to trial, Cynthia argued that the money from her mother-in-law was a loan, while Dennis claimed that it was a gift.  This is an important distinction, because if it was a loan, then it was a marital liability, meaning that the court must decide which former spouse is responsible for paying how much of the outstanding balance.  If it was a gift, then it was a marital asset and should be included in the amount of profit from the sale, to be divided between Dennis and Cynthia.  The trial court decided that the money from Dennis’s mother was a loan and that Dennis was responsible for the entire remaining balance on it.  Dennis appealed this decision, and the appeals court continued to classify the money as a loan but decided that each former spouse should bear responsibility for part of the amount.  It remanded the case to the trial court to determine how much of the debt to assign to each spouse.

Contact Schwartz | White About Divorce and Debts to Family Members

A South Florida divorce lawyer can help you if your in-laws want you to pay them back now that you are getting divorced.  Contact Schwartz | White in Boca Raton, Florida about your case.



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