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Examining the “gift defense” in Sclafani v. Sclafani

When a couple divorces in New York and cannot agree on how to divide marital property, the court will make a decision using the state’s equitable distribution laws. But before any dividing can occur, it has to identify separate vs. marital property.

Separate property consists of assets and debts that belong to one spouse only and are not subject to equitable distribution. Examples include:

  • Property owned before the marriage
  • Property received as an inheritance
  • Gifts received from a third party (gifts between spouses, on the other hand, are considered part of the marital estate)

The latter criterion became a point of legal contention in Sclafani v. Sclafani, which came before the Appellate Division of the Supreme Court of New York in 1991.

After marrying his wife, Gail, in July 1983, Jerome Sclafani started working as an hourly employee at his brother’s incorporated company. In October 1986, he was issued 20 shares of stock in the business, followed by 20 more. His brother intended to provide him with 20% ownership in the corporation. Two years later, Mr. Sclafani, who continued to work there as an hourly employee, received 10 more shares, increasing his equity to 25% of the company.

When the Sclafanis divorced, he contended that the shares were gifts from his brother and therefore his separate property. Mrs. Sclafani insisted that the shares were compensation earned while married, and the New York Supreme Court agreed with her, as the brother had filed no gift tax return and no shares had been issued to other siblings except another brother who worked for the company for six months. The court found that the shares were, therefore, marital property and awarded 30% of their value to Mrs. Sclafani.

Mr. Sclafani appealed. This time, he told the Appeals Court that a percentage of the stock should have been allocated to reflect the work he had done for the company during the 18-month period before he married his wife. The court noted that Mr. Sclafani didn’t raise this issue before the Supreme Court and that the record showed that he worked longer hours in the years immediately preceding receipt of the stock (during which he was married). It rejected his bid to adjust the distributive award.

Contact a New York family law attorney

Property distribution is one of the most contentious issues in a divorce. When a couple cannot reach an agreement on their own, the court will have to make a decision that leaves one or both spouses unhappy. A New York divorce attorney can help you propose an arrangement that allows you to retain valued property by offering your spouse something of equal value and, if necessary, protect your interests during litigation. Experienced legal counsel is your best asset when contention arises during divorce. Jayson Lutzky is a Bronx, NY attorney with over 35 years of experience. He has helped many clients through the contested and uncontested divorce process. You may reach his office at 718-329-9500.

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