What's Mine is Mine: Dividing Gifted Property in Iowa Divorces

When a gift benefits two parties to a divorce, who keeps the gift? Where the gift is an item, such as jewelry, where only one party regularly uses it, then perhaps the gift was obviously intended to belong only to that party. But what if the gift is an automobile or a house, and both parties shared the use of the gift during the marriage?

On January 23, 2020, the Iowa Court of Appeals ruled in the case, In re Marriage of Pleggenkuhle, that a gift from the husband’s parents was not a gift to him only, but rather a gift to the couple. In Pleggenkuhle, husband and wife purchased 80 acres of farmland from the husband’s grandparents and his parents provided a $50,000 gift to help finance the building of a new house on that land. In 2012, his parents made another $50,000 payment to assist with refinancing the mortgage to lower the principal balance. The property was held by the parties as joint tenants. 

After trial, the husband was ordered to make an equalization payment to the wife totaling $288,682. He appealed that property award, claiming that the two $50,000 payments from his parents were a gift only to him and should be set aside and excluded from the division of the parties’ assets.

Section 598.21 of the Iowa Code provides 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: 1) whether the property was transferred to just one of the spouses, and 2) whether it would be inequitable not to divide the property. The Court noted that the donor’s intent and the circumstances surrounding the gift are controlling. The husband and his father both testified that the purpose of the gifts were to keep the farm in the family, but the Court indicated that “the gifts went to the purchase and then refinancing of the marital home” which was held in joint tenancy. 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 [husband] and [wife].” The Court also pointed out that the gifts benefited both parties by enabling them to build and maintain a family home.

Presumably the residence and land were awarded to the husband in Pleggenkuhle but the wife was probably entitled to receive one-half of the full net value of the home, as opposed to reducing the value of the property by the $100,000 value of the combined gifts, as part of her $288,682 property award. In this case, where the gift benefited both parties to a divorce, both parties shared in it.