When getting a divorce, the issue of gifted property often arises. If one party is personally gifted something such as jewelry and they are the only ones who were intended to have it and use it, does it remain theirs after a divorce? What if there is a gift given to both parties, who gets it following a divorce? What if the gift is something significant, such as a home or vehicle, and both parties use it? This article will provide an analysis of Iowa law and answer these questions on the division of gifted property in Iowa divorces.
In January of 2020, a landmark case for gifted property division was ruled on, In re Marriage of Pleggenkuhle. The Iowa Court of Appeals ruled that a gift from the husband’s parents was not just a gift to him only but rather a gift to the couple. In Pleggenkuhle, a couple purchased 80 acres of farmland from the husband’s grandparents. The husband’s parents gifted $50,000 to help finance a new home that was built on the land. Later on, in 2012, the husband’s parents made another $50,000 payment to help refinance the mortgage and lower the principal balance. Both the husband and wife were listed as owners of the property as joint tenants.
Following the initial trial, the husband was ordered to make an equalization payment to his wife totaling $288,682. This included the two $50,000 payments made by his parents. The husband appealed the case, noting that the two $50,000 payments from his parents were a gift only to him and therefore should be set aside and excluded from the division for the parties’ assets.
Iowa Code Section 598.21 states that “the court shall divide all property, except inherited property or gifts received or expected by one party, equitably between the parties . . . “ In the Pleggenkuhle case, the Court applied a two-prong test. First, the court determined whether the property was transferred to just one of the spouses. Second, the court determined whether it would be inequitable not to divide the property. The Court stated that the intent of the gift giver and the circumstances surrounding the gift are controlling. The husband and father both testified in Pleggenkuhle that the purpose of the gifted money was to keep the farm in the family. However, the Court in the case indicated that “the gifts went to the purchase and then refinancing of the marital home” which was held in joint tenancy by the husband and wife. The court ruled that, although placing an asset in joint tenancy does not automatically mean that the asset is to be jointly divided, “the evidence in this record shows the parents intended their gifts, when they were made, to assist both [the husband] and [the wife].” The Court finally pointed out that the gifts benefited both parties by enabling them to build and stay in the home they lived in.
The result was that the husband was awarded the residence as well as the land but the wife was entitled to receive half of the full net value of the home. There was no reduction by the two $50,000 gifts made by the husband’s father.
To conclude, Iowa Code Section 598.21 allows gifts made to one party to be separate from property division in a divorce. However, Pleggenkuhle has specified that, should the gift to one party benefit both parties and be shared by both parties, the property may be subject to division.
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