Q: If my sister gifts me a house, will it be considered marital property?
I live in Maryland. My sister bought a house. I live in it with my husband and kids and I pay rent to my sister. She has said that she will gift me the house when it’s paid off. In this case, will the house be considered the marital property of me and my husband, or just mine?
A: A gift is not marital property. Payment of rent that is actually payment made as part of an agreement to purchase the house would be deemed payment toward marital property. A mere promise to gift you a property in the future is not an enforceable agreement or contract, meaning your sister does not have to follow through with her promise once she pays off the mortgage. In fact, should she die before that happens, her estate would own the house and it would pass to her heirs or as directed by her will. Unless there is some agreement, like a "lease to own" agreement that is in writing (contracts for the transfer of real property must be in writing), whereby in exchange for paying rent for a specified period of time--usually in an amount in excess of fair market rental rates to represent payment toward the actual value of the property--after which you will own or have the right to buy th property at some specified date in the future, then this is not an enforceable contract, so characterizing the future promise to gift the property as marital would be difficult or impossible. However, if you expend marital income and funds to improve the property (new kitchen, new roof, addition, etc.) knowing that it will be gifted to you within some period of time, then your spouse could argue part of the house improved by those capital improvements would be marital. After you are gifted the property, the extent to which you renovate of expend marital funds to improve the property with capital improvements (not merely normal maintenance and upkeep or paying homeowner's insurance and property taxes), or if you were to take out a mortgage and then use income or funds earned during the marriage to pay the loan off, would all go to convert some portion of the property into marital property for purposes of an equiitable division in a divorce, which might simply mean that your spouse would get more of other joint marital property to make up for the marital interest in the house. You must only take title in your name, and not add your spouse to the title, if you want to preserve this house as a non-marital gift. Other options to prevent this becoming an issue in the future would be to sign an antenuptial agreement with your spouse removing the house from the calculation of marital property in the event of divorce; or possibly having your sister place the house into a trust and naming you as beneficiary. However, both of these options have pros and cons and cost money; and there are things you can do if you remain disciplined about them to preserve this future gift, when it happens, as non-marital or mostly non-marital property. You may wish to consult a lawyer about how to proceed to insure the house remains clear of your spouse's potential marital property claims.
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