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Divorce: Inheritances and Gifts
          

 

April 1, 2006
Written by Staff at The Centre for Mediation & Dispute Resolution

Divorce: Inheritances and Gifts

Divvying up the marital estate is no easy task. Questions abound. Can the parties afford to keep the children in the house? Should they sell the marital home and buy two places to live? Does one party keep the retirement funds and the other the house? Does the one with the retirement funds do better in the future or worse? Should we just divide everything down the middle? Who gets what stuff?
The questions are many; answers are few. Yet perhaps the most difficult questions of all pertain to inherited and gifted money – those already received and those which are yet to come. Here the vagueness of the law leaves many couples without guidance. More importantly issues of fairness intercede exposing the emotional rawness and hurt pervading the divorcing process. As such, issues surrounding inheritances and gifts are among the most thorny and complicated of the divorce dilemmas. Consider the following situation:

Sarah’s mother had been extremely generous to her and Tom, gifting annually moneys to each of the family members. As a result Tom and Sarah Kahn had a down payment to buy their house and each of their two children had a college fund. Tom’s parents were different. They were concerned about outliving their money. They did not gift funds to them, but would, it appeared, leave a few hundred thousand to Tom upon their death.

Tom appreciated the generosity of Sarah’s mother, but he could find no justification to agree to share a future inheritance with his soon to be ex-wife. Tom did not want the divorce; if Sarah wanted the inheritance so much let her stay married to him.

Focusing only on the fairness question. Sarah felt she had already shared her inheritance with tom. Divorce or no divorce, it seemed fair to her that Tom should share with her whatever he eventually received. Conversely Tom felt what was done was done. After the marriage neither one should be entitled to benefit from windfalls received by the other, whether it was a lottery ticket or an inheritance.

One answer for this couple would be to take their dilemma to the judge. Let him or her decide what would be fair in the larger context of the division of all assets. But the Kahns did not want the judge to tell them how to divide their property or, for that matter, to tell them what would be fair. For them the answer was to be found in mediation. Mediation offered a process in which their notions of fairness could be explored in the larger context of divvying up their property. Here, too, they could also look both to the future as well as back to the past. Sarah and Tom analyzed and projected each one’s financial present and future. They also looked at considerations of their children’s financial needs, now and in the future. And, then too, they listened to each other as they explored feelings associated with fairness within the “bumpy” setting of divorce. For the Kahns the end result was for Sarah to receive credit for moneys gifted by her mother toward the purchase of the house, and for Tom to agree to match, with his inheritance, moneys gifted for the children’s education. To Sarah and Tom this was a fair deal; one that recognized each other’s feelings and that was based on an analysis of the family’s real financial needs.

Whatever the end result, it is important that couples embark on a decision making process that is based on “real needs” and “real data.” In the context of a reality analysis, feelings can also be explored and considered. Issues of fairness are of course relative by nature; what works for one couple may not work for another. What is fair to one couple may be unfair to another. With a skillful, sensitive, and knowledgeable mediator, the opportunity exists to find answers for each couple that are based on reality – the reality of facts and of feelings. In the end, both parties can celebrate the fact that they have been fair to themselves and to each other – a feeling that lingers and helps long after the divorce is over.


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