Can donations be revoked during a divorce?

Understanding the rights of donors and the legal status of joint estate contributions

Young couples – and sometimes not-so-young couples – are often the grateful recipients of generous financial donations from family members who want to help the couple on their married journey, particularly in the current economic climate where a lump sum for a deposit on a property can make the difference between home ownership and renter status. Third-party donations like this are usually made to a couple’s joint estate when they are married in community of property. If the couple subsequently divorces, what happens to such a donation? In South African law, the question of whether a donation can be revoked during divorce proceedings raises complex issues involving marital property regimes, donor intent and the narrow doctrine of revocation for ingratitude. A legal framework surrounds donations in the context of a pending divorce where the estate has not yet been divided. Donors may have legal recourse to retract a gift, but the circumstances giving rise to that are extremely limited.

Donations to a joint estate: in community of property

In South Africa, the default marital regime, unless an antenuptial contract states otherwise, is marriage in community of property. Under this regime:

• Each spouse owns a half share in the joint estate
• All assets and liabilities are shared equally, regardless of who acquired them
• Donations made to either spouse, unless explicitly excluded or personal, are presumed to benefit both spouses

When a donor transfers a sum of money or an asset to the couple for whatever reason, if the donation is not explicitly documented as personal or conditional, it forms part of the joint estate. For example, if R500,000 is transferred to a married couple with an email stating it is for “your family’s use”, that amount becomes a joint asset, owned equally by both parties, provided the couple is married in community of property. (Other matrimonial regimes will incur different treatment of donations; this article deals exclusively with marriage in community of property.)

Revocation of donations during divorce

South African law provides limited circumstances under which a donation can be revoked during divorce proceedings. The primary basis for revocation is ingratitude. However, this doctrine is  narrow and is based on serious misconduct against the donor, not between the spouses. Typical acts that might be considered grounds for revocation for ingratitude include:

• Physical or verbal abuse of the donor
• Criminal behaviour against the donor
• Serious defamation or fraud committed by the recipient against the donor

Mere disappointment or disapproval of the divorce is not sufficient. In the context of divorce, even if one spouse has acted dishonourably (e.g., infidelity), unless that conduct is targeted at the donor, the courts are unlikely to permit revocation.

What if the donor wants to intervene in the divorce?

Donors who feel aggrieved during divorce proceedings often threaten legal action or intervention. However, third-party intervention in divorce is highly restricted. To be allowed by the courts to intervene in a divorce, a donor must:

• Demonstrate a direct and substantial interest in the matrimonial estate
• Prove the existence of a conditional donation or a contractual breach
• Show that their financial rights are materially and legally affected by the divorce

Without a clearly defined legal interest, the court will not permit interference in divorce proceedings. Even if the court acknowledges the donor’s legal standing, the donor must show that:

• A written donation agreement is in place
• The terms of the donation have been breached
• Legal restitution is appropriate and not simply morally desirable

The importance of donor intent and timing

The courts closely examine the donor’s intention at the time of making the donation. For instance, if a donation was described at time of giving as “a gift to help the couple settle down” or “for the family”, this is treated as an unconditional gift unless there is formal language to the contrary. Attempts to redefine a donation in retrospect as a loan, trust contribution or conditional gift will almost always fail if there is no documentation dating from the time of the gift.

The law does not allow donors to impose new conditions after the donation has been made simply because the couple is divorcing. Once an asset is donated to a joint estate without explicit conditions, it becomes jointly owned. Divorce does not alter that ownership.

Can a spouse “forfeit” the benefit?

A donor may hope that one spouse (typically the “other” spouse, i.e., not their family member) will “forfeit” the benefit during the division of the estate. However, forfeiture in South African divorce law is governed by the Divorce Act. A court may order forfeiture of benefits if:

• The marriage is dissolved due to serious misconduct
• One spouse would otherwise unduly benefit from the marriage

Forfeiture is not automatic, and courts do not generally use it to reverse donor decisions. If the donation formed part of the joint estate, it may still be included in the calculation of assets, even if one spouse behaved poorly, unless the misconduct is severe and directly impacts equitable division.

A gift is a gift

Donors who have made financial gifts to couples married in community of property may feel let down when the couple divorces. The same is often true of friends who have given generous wedding presents only for the couple to divorce after a short time. However, the law offers limited remedies to revoke or reclaim such donations, especially during divorce proceedings. Basically, once a donation or gift becomes part of the joint estate, both spouses have equal rights to it. Revocation is only possible under narrow, exceptional conditions and intervention in divorce proceedings requires clear legal standing.

To avoid future disputes, donors should document their intentions clearly and consider legal instruments such as loan agreements, trust structures or conditional donations with written stipulations.

Cape Town family lawyer can help

SD Law is a firm of family attorneys in Cape Town, Johannesburg and Durban with deep experience of divorce and asset distribution. If you are considering making a substantial financial gift to a couple and would like to discuss the best way to do that, call family lawyer Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za for a confidential discussion.

Further reading:

• Dealing with hidden assets in divorce
• Protecting high-value assets during divorce
• Dividing luxury items in divorce

Divorce Attorney Cape Town

http://divorceattorneycapetown.co.za/

View more posts from this author