Sunday, May 4, 2014

That doesn’t count!

Cook v. Coburn, 2014 VT 45

By Andrew Delaney

This appeal is all about what “counts” as a marital asset.

Husband and wife were married for about 13 years before they separated. They met when then-wife-to-be hired then-husband-to-be to build a ten-stall addition onto her barn. Wife had started a horse stabling and training business several years earlier. Husband later moved in with wife. At the time of the parties’ separation, the property was valued at $260,000.

Husband has been a dairy farmer, farrier, and builder his entire adult life. People fall in love for all kinds of reasons, but I’m guessing this relationship was born of a love for horses. Hey, I married a horse lady—trust me on this one. Husband here very well might’ve been her first choice.

Also around the time of the parties’ separation, husband’s mother deeded the family farm to husband through an enhanced-life-estate, estate-planning tool known by various names: Lady Bird deed, Medicaid deed, etc. The effect of this “transfer” is that it gives the person deeded to an opportunity to receive the property upon the death of the grantor without going through probate or having to deal with Medicaid liens. In the meantime, the grantor has a life estate in the property (can live there as long as grantor is alive) and can mortgage, otherwise encumber, or even sell the property. An appraiser valued the property at $515,000 without considering husband’s mother’s reserved rights, and at $425,000 considering those reserved rights. Husband also owned a small portion of land next to the farm valued at $15,000.

The parties also had a business called “Bit Wipes” that was valued—for various reasons—at $40,000. Husband requested his portion of the business be awarded as spousal maintenance. But the trial court could find no basis to do so.

Following a six-day hearing, the trial court weighed various factors—including the parties’ employment history—and concluded that the net marital estate should be more or less equally divided.

The trial court awarded wife the horse-farm property and an adjacent lot, the Bit Wipes business, and various personal property items. It awarded husband the family farm and the adjacent lot, and various personal property items. The trial court calculated wife’s award at $435,700 and husband’s at $452,400.

Husband’s first argument is that the trial court erred in awarding wife husband’s adult son’s truck. Wife agrees, so this is a nonissue. The court had no jurisdiction over the truck, so the SCOV strikes that part of the order.

Husband’s next argument is that the trial court screwed up when it treated the family farm as part of the marital estate because he only holds an expectancy interest in the property, and the trial court failed to appreciate this fact.

The SCOV notes that the trial court has “wide discretion” when distributing marital property and that only an abuse of discretion will be grounds for reversal. Without skipping a beat, the SCOV holds: “The court abused its discretion here.”

The SCOV reiterates that the trial court has jurisdiction over all property owned by either or both parties to a divorce. Because husband did not “own” the horse farm at the time of the divorce, and because it is a “mere expectancy” interest, the trial court erred in counting it as a marital asset. The SCOV refers to a significant recent decision dealing with the same type of problem in reaching its conclusion.

The SCOV notes that the expectancy interest is not entirely excluded from the property-distribution calculus, however. It may be considered as a factor in considering each party’s opportunities to acquire assets and income in the future. Because the family farm is not yet owned by husband, it can’t be distributed as a marital asset. “Husband’s mother retains full control over the property during her lifetime, and she has not actually conveyed anything to husband.”

The SCOV thus reverses and remands to the trial court for a new order regarding distribution of marital assets. The SCOV notes that, in this context, husband’s request for spousal maintenance may be considered in the new proceeding and within the context of the SCOV-imposed view of the marital estate.

Remember boy and girls, the trial court’s authority over marital property is extremely broad, but if you don’t yet “own” something, it doesn’t really “count” as an asset.

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