Dear Quentin,
I got myself into a real doozy.
I made $57,000 in loan payments on my now husband and then boyfriend’s house. He was going to let his place get foreclosed on, but since I had already spent quite a bit of money helping him out, I didn’t want that to happen. Our plan was for him to sign the house over to me and my son once his loan was paid in full. We got married.
Well, you guessed it: I paid off the loan and now find myself in court because, all of a sudden, he has decided that now that his house is paid off in full, he no longer wants to be married to me and wants his place back! My attorney said that what I paid toward the loan is money I effectively gave him as a gift, but the rest is marital funds.
It now looks like the kindness I showed him in trying to help save his house and his credit rating — and to ensure that my son had his own home — is going to cost me $57,000, and all because of this jerk. What can I do to recover my lost funds? Is it true that he can now walk away with his house in our divorce?
Feeling Like a Fool
Related: My husband, 76, and my daughter, 26, don’t get along. How do I make sure he doesn’t disinherit her if I die first?
Dear Feeling,
You spent a lot of money on a wing and a prayer — and your boyfriend’s promise. But if you paid off the loan on this house using marital funds after you were married, the house would likely be commingled from separate into marital property. That is, you would now both own this house 50/50. Generally, anything purchased before a marriage is regarded as separate property, and anything accumulated during the marriage is deemed marital property.
If you paid all of this money during your courtship and before you were married, then you have found yourself in that old “he said, she said” debacle typical of a “Judge Judy” episode: “He says it was a gift!” “She says it was a loan!” In other words, it’s your word against his and, legally, it was a gift. You were giving him money with the understanding or promise that he would sign his home over to you. But what you say he said he would do does not constitute a legal contract.
Moreover, the deal was fishy to begin with. If the home was worth, say, $200,000 and you paid off the remaining $57,000, it does not seem reasonable that he would sign over the entire property because you saved him from foreclosure. The arrangement seems skewed in your favor and, although he said he would transfer ownership of this house, he is entitled to change his mind. If this transfer occurred before you were married, you would also likely have had to pay gift tax.
For what it’s worth: The annual exclusion, or the amount you can give a third party without using your annual gift or estate-tax exemption, is $17,000 in 2023 for a single person or $34,000 for a married couple. Otherwise, you would have to file a gift-tax return to the Internal Revenue Service. The donor — your then boyfriend, in this case — would generally be responsible for paying the gift tax, which ranges from 18% to 40%. (It is, for example, 32% for a gift of $150,001 to $250,000.)
This is a complicated and messy situation, but perhaps less of a “doozy” than you think.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
My wife received a $1 million payout from her employer when she retired. Am I entitled to 50% of that if we divorce?
I’m a 61-year-old single librarian and ‘proud’ Democrat from Maine. Should I move to Florida like Jeff Bezos?
I cosigned my boyfriend’s mortgage, but I’m not on the deed. I didn’t want to marry again after a costly divorce. How do I protect myself?
Read the full article here