In its January 8, 2015 decision in Albertalli v Albertalli, the Appellate Division, Third Department, upheld the granting of a separate property credit to a husband for the contribution of his separate funds to the purchase of the parties’ home, even though he deposited those funds in a joint account a month before the home was purchased.
Among the issues decided in this divorce action was the equitable distribution of the marital residence, the main asset of the parties, purchased five months after the marriage. The husband contributed $33,000 of his separate property (funds received by the husband prior to the marriage as a gift from his grandfather) into a joint account created one month prior to the purchase of the residence. The parties then used $24,915 from the joint account as a down payment on the purchase price of $71,000 and mortgaged the balance. At the time of trial, the residence was encumbered by a remaining balance on the mortgage of approximately $45,000 and a home equity loan of approximately $6,500. The evidence at trial established that, in its current condition, the home would be listed for sale at $64,500 and expected to sell in the low $60,000 range.
In distributing the residence, Chemung County Supreme Court Justice Judith Ferrell O’Shea concluded that the funds used for the down payment were the separate property of the husband and granted him a credit for that amount. The court also directed that the home be listed for immediate sale. The wife appealed, challenging the credit and the immediate sale.
Although the funds received by the husband as a gift from his grandfather prior to the marriage were considered separate property (see Domestic Relations Law § 236 [B] [1] [d] [1]), they presumptively became marital property once the husband deposited them into a joint account. In order to rebut the presumption that the funds became marital property, the husband was required to come forward with clear and convincing evidence that the joint account was created for convenience. Justice O’Shea concluded that the funds remained separate property based on the timing of the deposit, the ability to clearly trace the source of the funds used for the down payment and the husband’s testimony that the funds were placed in the joint account only because it was at the same bank from which the parties were obtaining the mortgage. Deferring to the court’s credibility determination, the Fourth Department found no basis to disturb that conclusion. Having determined that the funds were separate, it was within the trial court’s discretion to determine whether to credit the husband for the use of his separate property in acquiring the marital residence.
While “partial use of separate funds to acquire a marital asset does not mandate that a credit for separate funds be given”, the appellate court found no basis to disturb Supreme Court’s exercise of its discretion here.
A spouse contributing separate property (most commonly pre-marital, gifted, or inherited funds) to the purchase of the marital residence does not make a gift of (half of) that payment to the other spouse, even if the residence is held by the parties jointly.