1. If a spouse transfers premarital assets into a joint account during the marriage, how are these assets then treated if the parties get divorced?
In today’s world, especially in second marriages, premarital assets are often placed in joint names during the marriage. There are many reasons why premarital assets are placed into the other spouse’s name. The first major reason is for asset protection purposes. A husband may be self-employed and his business may be failing. A husband may want to transfer assets into the wife’s name to protect his assets from his creditors. The second major reason why a husband may transfer assets into joint title with his wife is when the bank or mortgage company requires so. In many type of refinancing situations, a bank or a mortgage company will require that both spouses be placed on the title to the marital home when a premarital mortgage is refinanced.
It is extremely important to emphasize that when a premarital asset is placed into a joint name, then this triggers many legal implications. It is black letter law in New Jersey that a premarital or an immune asset is generally not subject to equitable distribution. However, it an asset is placed in joint names, then the court now has the power to distribute assets under N.J.S.A. 2A:34-23.1.
2. Are there any exceptions to the legal principle that premarital assets that are placed in joint title are not subject to equitable distribution?
Yes there certainly is. In the case of Dotsko v. Dotsko, 244 N.J. Super. 668 (App. Div. 1990), the court established an important exception to the legal principle that assets placed in joint tile are not subject to equitable distribution. In the Dotsko case, court held that just because premarital assets are placed into joint title, this factor does not necessarily mean that the asset is subject to equitable distribution.
In the Dotsko case, Mr. Dotsko’s father and aunt made several gifts to him. The father and the aunt had a specific intent that these gifts would benefit only benefit husband. Thereafter, Mr. Dotsko only for convenience purposes, and only for a short period of time, placed these gifts into a joint account while he was waiting for one more gift to be made. Once that belated gift was made he then removed the funds from their joint account.
The parties eventually got divorced. At the divorce hearing, the wife argued that since the funds had been placed in a joint account, they were now automatically subject to equitable distribution. The trial court agreed with the wife and held that the transfer into the joint account was an inter-spousal gift.
The case was appealed and the court ruled that the transfer of these funds into a joint account was not a gift. The Appellate Division applied the legal principle of what was the donors’ intent. The Appellate Division further held that the father and the aunt did not have any donative intent to transfer these funds to the wife. Thus, the court held that absent any donative intent, there cannot be any type of valid legal gift. Finally, the court held that there was no clear unequivocal evident that the father and aunt ever intended to give the funds to the wife.
3. What is the legal importance of the Dotsko case?
The Dotsko case is a very important one. Whenever an immune asset is transferred into joint names, then there must be an inquiry as to why the transfer was made. In the common scenario wherein a premarital home is refinanced, and the owner is advised that the new spouse must be on that deed, then the mere fact of adding the spouse to the title does not necessarily satisfy the clear donative intent requirements. An argument can be made that a true title transfer did not take place because the owner intended to make a gift, and that he never had any donative intent, because it was only a legal requirement of the bank. Thus, in this type of scenario an argument can be made that all the wife received was bare legal title, and this factor does not automatically make this asset subject to equitable distribution.
4. Are there any other significant New Jersey cases that address placing immune assets into joint names during the marriage?
Yes, another interesting case is Ploszaj v. Ploszaj, (Unpublished, December 20, 1984). Here the Appellate Division affirmed the trial court’s ruling that even though an exempt and immune asset was placed in joint names it was not subject to equitable distribution. The court reasoned that the grantor also had a lack of donative intent.