2018 Update: Equitable Distribution: WV Divorce Property Law
Published to: community property, Divorce, equitable distribution, estoppel, Family Law, Harrison County, Mediation, personal property, real estate, West Virginia
on March 7, 2018 7:00 pm
Most of my clients have property smaller than this former Vanderbilt abode in Asheville, N.C., The Biltmore!
There seems to be less confusion about the basics of equitable distribution than other aspects of WV divorce law. Most people who come to me understand that property acquired by the work of either party during the marriage is presumed to be owned 50%/50%. As they say, “The devil is in the details”.
That doesn’t mean they are happy about it. The man especially does not want his estranged wife to have “half of MY retirement”. Many think their stay-at-home wife should walk away with nothing. Perhaps there is an insight as to why they are facing a divorce!
Strong marriages often have a shared assumption that everything is shared and both parties equal. But, when a wealthy person marries a pauper, or people in their 40’s-60’s with adult children and other complications marry, the ramifications can be much different than when two people of similar status marry young.
WV is an “equitable distribution state”, not a “community property state”.
Here is a practical, not scholarly, explanation:
1. If it was purchased during the marriage, whether by one person’s paycheck or both, whether titled in one or both names, and even if it a lottery winnings from a ticket bought from a cashed paycheck, it is marital.
2. If it was inherited by, deeded to, or gifted to the recipient only, by a friend or family member, it is separate.
3. If separate property such as cash is deposited into a joint account, or conveyed 50% by deed to the other spouse, it usually is treated as a completed gift or conveyance of half of that property. So, now it is marital.
4. If separate property, e.g., the family house owned by a party before the wedding, is secured by a loan, incurred before or during the marriage, and that marital debt is paid off during the marriage with marital income, the increase in the value of the equity is considered marital, and, until that equity becomes as valuable as the separate property, the equity and the separate property are considered “mixed” property. Examples of “mixed” property are:
a. The log cabin on 50 acres, inherited from husband’s grandmother, that the parties spent $100,000 improving, incurring an $80,000 loan. The “marital” part is the increased value of the property, NOT the amount spent, which might be much more. Editor’s Note: this example requires a dual calculation, the reduction of debt by loan payments made during the marriage, and the increase in value by the investment of marital income. Passive increases in value of separate property are not supposed to become marital.
b. The real estate becomes marital as that debt is paid off and equity increases. If the other $20,000 came from separate property of a spouse, there is some law supporting the concept that the contributing person can ask for a variance from the 50%/50% rule, but the stronger law presumes it as a gift too.
c. The example in b. above is “fact driven”; for example, if the spouse who owns nothing in the cabin expresses doubt about investing $100,000 into the other spouse’s cabin, and promises are exchanged (and perhaps a fence built) assuring the reluctant spouse that if he will agree to incur the loan and pay the payments, that five acres will be carved out around the cabin and a right of way to and from it created as marital property, the spouse who made that promise will likely to be “estopped” from refusing to sign a deed to that five acres later.
d . The better course of action is to agree in writing (in order to avoid misunderstandings) and get the deed signed before the construction begins. But, people in love do not always act in their best financial interests, and some promises are soon forgotten. Editor’s note: The other side of this coin is negotiating a pre-nuptial agreement at the beginning of a marriage can lead to tension and resentment that leads to marital strife, even the cancelling of the wedding.
e. Where a party works 15 years, building a retirement, before marriage, marries, and divorces 25 years after that, the general rule is the spouse shares 50% of the retirement accumulated during those 25 years.
f. The “simple calculation” is to divide 25 years by 40 years and to split the result evenly : 25/40 = 62.5%; 62.5%/2 = 31.25%. Thus, the spouse is entitled to just under 1/3 of the 40 year fund. The 25/40 is called the “marital coverture”.
g. Our WV Supreme Court ruled in 2006, “50% really means 50%”, when it ruled that the stay-at-home wife of the dog racing mogul, whose marital estate was worth over $26,000,000.00, really was entitled to $13,000,000.00. That case is Arneault v. Arneault, 639 S.E.2d 720 (2006).
h. The facts that she stayed at home, raised the children, ran the house, entertained guests, including business associates, and managed household finances, which were considerable, were sufficient to show an agreed marital partnership. Barring extreme hardship, that’s the assumption the court is going to make, especially if to do otherwise would result in a gender preference.
i. Methods of rebutting the marital presumption include proof of gambling addiction, alcoholism, or drug addiction that reduce the marital estate, or just plain stupid-wasted or misjudgment. I once had a case where my client, a title abstracter, came home and warned the husband that his friends had a number of tax liens recorded against them. She urged him to have no business dealings with them. He ignored her, co-signed on their loan, and that debt was determined to be separate.
j. Another twist is when the marital residence is built on the in-laws property, based on assurances the lot will be theirs. Later (They always knew he was a bum!), the parties separate, and the promises to convey the land are rescinded, forgotten, or denied. This scenario is also “fact driven”, and the litigation must move to the circuit court since it involves parties who are not part of the marital partnership. Often these issues are resolved at mediation since neither party relishes the expense or delay of another lawsuit, in circuit court, involving one of the party’s parents.
k. A gift to parties before the marriages fail are just that. The giver doesn’t get to take them back if the spouse is a louse. Thus, a couch that both used, the washer/dryer, and the van put in both names, are marital, but the personal gifts from family, the engraved rifle, or the deed in daughter’s name only, remain separate.
L. Editor’s note: I recently was exposed to a VERY IMPORTANT twist to the rules and examples listed in A-K above. In two cases, a spouse disposed of a residence for which they had a good argument were their separate or almost fully separate, property. They signed deeds without notifying their spouse or having their spouse sign the deed. There is a law covering that. It was authored, at least in part by a friend and colleague of mine, who explained it to me.
It is WV Code Article 43, Chapter 1, Section 2: The rule of the statute is that failure to do either, notice or signature on deed, if done w/i five years of a divorce creates a conclusive presumption that the property is marital. In one case, that added $100,000 to my client’s claim to the former family residence that was titled in the other spouse’s name!
Lessons learned from equitable distribution can be hard ones, just as picking the wrong spouse can be.
Many people begin to think of getting a pre-nuptial agreement, a subject for another day. Editor’s note: My case of Lee v. Lee, 721 SE 2d 53 (2011) reveals some of the perils of negotiating your own parenting plan. Both parties here lost because they used a downloaded Internet form!
My thoughts for most West Virginians, even ones who have gained some years, and some property, if you understand the principles below, you just need to make good decisions, to consult your lawyer when it is time to make these decisions, and to manage your property with common sense and compassion.
Good luck. And try to marry the right person, for the right reason(s).
This post was written by Burton Hunter