Dear Clients and Friends,
A recent South Dakota case makes clear that a gift to a married couple from one spouse’s family will count as a gift to both of them in the event of a divorce, even if the benefactor later claims he or she intended otherwise
The case revolved around South Dakota land that had been in Dennis Ryland’s family since 1878, when his great-grandfather homesteaded it. Ryland had only one child, who had moved away from South Dakota and had no interest in coming back to farm the land.
In 2006, when the farm was worth nearly $2 million, Ryland decided to give another relative, Matt Field, and his wife Aren, an option to purchase the farm for $300,000 to keep it in the family. This was such a generous price that it was essentially a gift.
The Fields exercised the option four years later and signed a note promising to pay back the $300,000 in annual $15,000 payments at five percent interest. They took title to the land in both of their names.
In 2014, Aren quit her job to raise the kids and help run the farm. Matt continued to manage the farm while holding down an outside job. But in 2016, Aren took the children, moved out and filed for divorce.
Division of the farm quickly became an issue, with Matt arguing that Aren’s share should include the $300,000 purchase price and payments already made on the note, but the rest of the farm’s value should go to him because it was really a gift meant for him only.
Dennis testified that while he knew he was technically making a gift to the couple, his intent was to benefit Matt.
A judge agreed and gave Aren half the purchase price but nothing else.
The South Dakota Supreme Court reversed, ruling that the nature of a gift is judged at the time of the gift, not by later changes, and that whatever Dennis said at the trial, the gift was to both Matt and Aren. Further, the court noted, the couple took title jointly.
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