Court Says Gifts Given by Husband's Parents Were Divisible in Divorce

On January 23, 2020, the Iowa Court of Appeals issued a ruling finding that cash gifts given by the husband’s parents while the couple was married constituted divisible property during their later divorce. The court found that the gifts were made to the couple with the intent to keep the farm in the family.

Background

After twenty-two years of marriage, a couple filed for a divorce. The pair first met in the United States Army. In 2001, they left the service and moved to Iowa, the husband’s home state.

When the couple moved to Iowa, they bought eighty acres of farmland from the husband’s grandparents. The couple used a $50,000 gift from the husband’s parents to help finance a new house on the farm. The couple took possession of the property as joint tenants. In 2011, the parents gave another $50,000 gift to assist with refinancing the mortgage to lower its principal balance.

The divorce decree awarded the farmhouse and half of the couple’s bank and retirement accounts to the husband. The decree ordered the husband to make equalization payments of $288,682 in several installments. It also ordered the husband to pay $750 per month in spousal support until the wife died or remarried. The husband appealed, claiming the two $50,000 gifts from his parents were to him alone and exempt from the division of marital property. He also claimed the spousal support award was inequitable.

Division of Gifts

During a divorce, the district court will identify and value assets which are subject to division. Iowa law states that inherited gifts and property given to one spouse are not subject to division during a divorce unless failing to divide the property would result in unfairness to the other spouse. See Iowa Code § 598.21(6). To determine whether property was intended for just one spouse, the court will determine whether the property was transferred to just one spouse and whether it would be inequitable to fail to divide the property.

At the divorce trial, the husband and his father both testified the gifts were meant to maintain family ownership of the farm. The father testified he wanted his son to be able to have the farm. Despite this, the district court found the parents intended the payments to be gifts to both the husband and wife. The couple used the first gift to purchase the home—held in joint tenancy—and then used the second gift to refinance the mortgage. The parents gave the gifts with the intent to keep the farm “in the family.” At that time, the wife was still part of the family. While the wife is no longer part of the family after the divorce, the court found that the evidence showed that the husband’s parents wanted to help both their son and his wife as a married unit at the time the gifts were made.

Spousal Support

The Court of Appeals also affirmed the district court’s award of spousal support. The 52-year-old wife’s health had deteriorated since the beginning of the marriage and evidence showed she could not hold a full-time job. The court also acknowledged the long length of the marriage, and the fact that the husband was eight years younger than the wife. The husband had the ability to continue to work on the farm.

The husband claimed the spousal support payment on top of an equalization payment and the wife’s future retirement earnings was inequitable compared to his salary. However, the court does not consider future retirement savings when calculating a present spousal support award because it is too speculative. Additionally, the equalization payment is made to divide the marital property equally, not provide future income.