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by James J. Gross

Jeb, the venerable divorce lawyer, sat in his office, trying to straighten his bow tie, when the phone rang.

The man on the other end, whose name was Greg, said he was going through a separation.  After some preliminaries, Greg said.  ”We’ve only been married for 13 months and she wants half of everything!”

“She’s not entitled to half of everything,” Jeb assured him.  “The court will only distribute marital property, and that means property acquired during the marriage.”

“So, if I made $150,000 during the marriage and she made $30,000, the court will distribute $180,000 between us?”

“Not exactly,” Jeb replied, “the court only distributes what is there on the day of trial.  So if you made $180,000 and spent $120,000, you saved $60,000 which the court will distribute as marital property.”

(To be continued)

 

Divorce lawyer Morris Green answered his phone on the second ring as was his custom.

“Morris!,” said the angry voice on the other end, “This is Ivana Copernica.  I’m calling you about your client, Stanton Fields.  Did you know that he has taken $10,000 out of his pension plan?”

“Yes, I did know,” Green replied calmly.

“He can’t do that.”

“Why not?”

“Because it’s marital property and my client did not agree,” said Ivana.

“I don’t think that your client’s consent is required.  Marital funds are expended by one party or the other in almost every divorce.  Unless they have separate property, that’s how they pay their living expenses.”

“What did he spend $10,000 on?” inquired Ivana.

“Why, his legal fees, of course.”

“Legal fees are not a marital expense.  That is a dissipation of marital assets and we’re going to ask the court to make him put those fees back in the pension account,” snapped Ivana.

“Before you do that, Ivana, better read the Allison case.  I’ll email it to you.  Let me read you the holding.  ‘We hold that when, as here, a spouse uses marital property to pay his or her own reasonable attorney’s fees, such expenditures do not constitute dissipation of marital assets.’”

Allison v. Allison, 160 Md. App. 331, 864 A.2d 191 (2004)

In a post titled “Determining Marital Property in Maryland, Virginia and the District Of Columbia” (June 17, 2011), I said:

“This article is about when the accumulation of marital property ends. It starts at the time of the marriage. When you return from the honeymoon and go to work the next Monday morning you are earning marital property – the stuff the divorce judge divides. When is the first day you can go to work and earn separate non-marital property? It depends on the jurisdiction.”

And after reviewing the applicable statutes, I said:

“When you and your spouse have separated, intending to remain separated, and do not have a property settlement agreement, in Maryland and the District of Columbia the property you acquire from the date of separation until the date of divorce is marital property. In Virginia such property is not presumptively marital, and in general is determined to be separate property, unless special facts and circumstances are established to overcome the presumption.”

In a recent case, Wright v Wright, 61 Va. App. 432; 737 S.E. 2d 519; 2013 Va. App. LEXIS 53, the Court of Appeals of Virginia considered whether Mr. Wright’s strategy in the two plus years between the date of separation and date of the divorce hearing required a finding to bring post-separation expenditures of marital property back into the marital pot to be divided with Mrs. Wright.

Husband had certain marital accounts totaling about $2,800,000. Husband earned approximately $1,500,000 per year; Wife was a homemaker. During the post-separation period, the marital accounts declined to about $1,415,000 on account of Husband’s payment of joint income taxes, real estate taxes on the marital home, tuition and school expenses for a child of the parties, spousal support to Wife and his own attorney’s fees and expert witness fees. Husband deposited the money he did not spend on these expenses to his separate accounts which, of course, were not marital.

The Court of Appeals said none of those expenditure were improper so they did not amount to “marital waste.” They explained that there are only two categories of expenditures of marital funds “proper” and “waste.” If your spending of marital funds falls into the “proper” categories it’s okay even if that permits a big decline in marital assets to be divided and a big increase in the separate funds of the party following the strategy.

The result in Wright provides a road map for the higher earning spouse to skew the division of marital property in his or her favor in some Virginia cases. If you are the lower earning spouse you want prompt filings, quick hearings and, if the stakes justify it, an injunction on expenditure of marital property.

Also, for multi-state or potentially multi-state cases, Wright is another reason that in a case with a relatively long separation, all other things being equal, the higher earning spouse probably wants the divorce case to be heard in Virginia. As I’ve said here before, a little planning and a little audacity can get you into the Court you want to be in. And a little more planning during separation can increase the property you get to keep.

Some of the facts here are from an article by one of the lawyers involved in the case. What’s wrong with Wright, Ronald R. Tweel (Virginia Family Law Quarterly, Spring 2014)

Barbara and Michael married in 1970 after graduating from Boston College.  They moved to Columbia, Maryland, where Michael got a job as a mathematician for the Department of Defense.   They had two children.  Michael left his government job for a lucrative position in sales for a computer company.  The couple lived off their income and invested Michael’s bonuses.

After 12 years of marriage, however, the parties encountered marital difficulties, and separated.   They divorced in 1984.

One of the issues in their divorce involved the valuation of two of their investments, namely limited partnership interests in real estate ventures.  The managing partner testified that one of the investments was worth about $50,000 and the other was insolvent and owed more than it was worth.  The court valued Michael’s share of the first partnership at about $11,000 and the second partnership at a negative value of approximately $15,000.

This was erroneous the Court of Special Appeals ruled.  The trial court has to value each item of marital property separately and there is no provision in the statute for deducting a loss on a bad investment from other marital property.  Therefore, the court could not assign a negative value.  The lowest value marital property can have is zero.

Green v. Green, 64 Md. App. 122; 494 A.2d 721 (1985)

by Michael F. Callahan

The “law of unintended consequences” (also called the “law of unforeseen consequences”) states that any purposeful action will produce some unanticipated or unintended consequences. – Wikipedia

Here are some of the consquences if a motion for stay is granted in a divorce appeal:

You’re still married so you cannot remarry.

If you die, your spouse is your widow or widower and has important rights with respect to your pension, 401(k) account, intestate estate (if you have no Will) and the right to elect against your Will if you have disinherited him or her.  In Virginia your spouse is entitled to a share of your augmented estate which includes non-probate assets and certain property transferred during your lifetime.

If you and your spouse own the former marital residence (or other real property) as tenants by the entirety and the divorce judgment is stayed then you still own it in that peculiar old common law tenancy.  If you die, he or she takes the whole property, you cannot leave your interest in the home to the kids, and you cannot borrow against or assign you interest.

In Maryland and DC you’re still earning marital property every day when you go to work.  If the case is remanded for a new hearing your further accumulation of money, property, pension credits, and other assets may be on the table for equitable distribution at that future trial.

When you seek to obtain a stay of a judgment of divorce, it just may be a case of “be careful what you wish for”.