Marital versus Nonmarital Property: The Law and Application in a Mediated Divorce Settlement

June 25, 2013

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In mediation, I work with parties to help them classify their property as marital, nonmarital or hybrid (some of each) property.  This is important because, in Virginia, judges are only allowed to order the division and distribution of marital property (and that portion of hybrid property that is marital).  Nonmarital property, on the other hand, stays with the party who owns it  — at least that is the rule when a divorce case goes to the judge.

In mediation, parties may or may not choose to follow these rules.  Unlike judges, parties who settle without court intervention are free to divide and distribute their property however they see fit. In my mediations, however, I make sure that the parties at least understand the rules before they decide on another way of doing things.  Just like a good English teacher will tell you: “It’s best to know the rules before you break them!”  This is all part of the mediator’s role in ensuring that the parties make informed and thoughtful decisions based on both their unique set of circumstances and a comparison of how they might fare in litigation.

The type of property that is classified, divided and distributed, upon divorce, includes everything – even the kitchen sink . . . and the dog.  The most common types of property that are the subject of a divorce settlement include:

  • Cash assets (bank accounts, investment accounts)
  • Real estate
  • Automobiles, motorcycles & boats
  • Retirement accounts, funds & benefits
  • Deferred compensation plans, profit sharing plans, stock options & restricted stock
  • Artwork, antiques & collectibles
  • Furniture & other tangible personal property
  • Life insurance policies
  • Closely held business & partnership interests

Property that is classified as marital includes all property acquired by the parties during the marriage. In Virginia, “during the marriage” is defined as: The date of  marriage through the date of separation (the date upon which the parties began living separate and apart, and at which time at least one of the parties intended the separation to be permanent). Please note, however, that the durational criteria, in many other jurisdictions outside of Virginia,  for classifying property as “marital”, extends to the date of divorce (not just separation). It is not uncommon, therefore, for mediation client to choose the date of divorce, as is done so many places outside of Virginia, as the “dividing line” at which property acquired becomes nonmarital.

Property that is classified as nonmarital consists, for the most part, of property acquired by either party:

a)    prior to the marriage;

b)    acquired by gift or inheritance from a third party to one of the spouses, individually (not as a gift to the couple); or

c)    after the date of separation.

            When determining whether a particular set of rules, with regard to the classification, division, and distribution of property, upon divorce, should or should not be applied in a divorce case, most parties will want to consider the following:

  • the totality of their financial circumstances;
  • the history of their family’s finances and any understandings that the parties may have had (implicitly, by action/inaction, and explicitly);
  • the potential effect that differing settlement decisions and proposals may have on other areas of their case (e.g. creating “bad will”, creating “good will”, feeding agitation, encouraging generosity in other areas, etc);
  • the parties’ relative earning power (even though this is not one of the statutory factors to necessarily be considered by a court[1]);
  • emotional attachment to property, such as a closely held business or valuable artwork and antiques (this is usually only up for consideration when there is a fair exchange for other property for which there is not such a strong emotional attachment)

Below are more rules, by way of example, that demonstrate how Virginia courts go about classifying property as marital, nonmarital, or hybrid property.

EXAMPLE #1: Husband has $50,000, all earned prior to the marriage, in an investment account in his name.  When he marries Wife, the two of them open up a joint bank account which they agree is to be the start of their “marital nest egg”, but there is no solid proof of this oral agreement.  Husband then removes $25,000 of his premarital money, from his individual investment account, and puts it into the new joint bank account.

            RESULT:  The court would probably consider the $25,000 in the joint bank account to be marital property by virtue of the doctrine of “transmutation”.  However, to the extent that $25,000 is retraceable to it’s origins as non marital property, and Husband can prove by a preponderance of the evidence that is was not a gift to the marriage (not as difficult, in Virginia, as one might expect), that $25,000 may end up being returned to Husband as his nonmarital property.  (VA Code §20-107.3 (A)(3)(f) & (g) & (h)

EXAMPLE #2:  Husband and Wife own a joint money market account, opened during the marriage, into which they each contribute money on a monthly basis. Wife inherits, in her own name, $10,000 (inherited money is nonmarital).  At that time, the balance in the parties’ joint money market account is $5,000.  Wife deposits her $10,000 inheritance into the joint money market, thereby commingling (a legal term) her nonmarital property with her and Husband’s marital property.

RESULT: The court would probably consider all $15,000 in the joint money market account to be marital property by virtue of the doctrine of “transmutation”.  However, just like in Example #1, above, to the extent that the $10,000 inheritance is retraceable to it’s origins as non marital property, and Wife can prove by a preponderance of the evidence that is was not a gift to the marriage that $10,000 may end up being returned to Wife as her nonmarital property.  (VA Code §20-107.3 (A)(3)).

EXAMPLE #3:  Wife owns a home, in her name alone, prior to the parties’ marriage.  After the parties are married, Husband puts in a new bathroom, with his own hands, a new tile floor in the kitchen, and wallpapers the large family room and foyer.  The house remains titled in Wife’s name.  The parties get a divorce and the husband seeks a portion of the value of the wife’s home.  Husband’s theory is that the home (or at least a percentage of the home) has been transmuted to marital property by virtue of his labor.

            RESULT:  The court may or may not consider Husband’s theory to be be a winning argument depending on three factors:  (1) Did the husband’s personal efforts contribute, directly, to an increase in value of the home?; (2) Were the husband’s personal efforts significant; and (3) Did the husband’s efforts result in substantial appreciation of the home?  (VA Code §20-107.3(A)(1)).  This area of the law is incredibly subjective and very expensive to litigate.  This is where “it depends . . . “ is an attorney’s favorite phrase.

EXAMPLE #4:  Husband has an online stock account when the parties get married, with an approximate value of $100,000 on their wedding day.  Husband spends, from that day forward, during their marriage, approximately 2 hours per week managing his stock portfolio.  It remains titled in his individual name.  No other money is put into that account during the marriage.  All assets traded emanate from Husband’s original (nonmarital) assets.  Over the course of the marriage, the $100,000 grows to $300,000.  The wife claims, in divorce court that, since the increase in value ($200,000) occurred during the marriage, that increase is marital property.

RESULT:  Once again, it depends. The increase in value of nonmarital property, during the marriage, is not usually considered marital property.  However, if the court finds the increase from $100,000 to be substantial (which it probably would) and find the husband’s 2 hours per week managing the stock portfolio to have been a significant amount of effort (which it may or may not), it may consider all $200,000 as marital funds, to be divided and distributed upon divorce.  (VA Code §20-107.3(A)(1)-(3))

EXAMPLE #5:  Husband and Wife marry while husband is on active duty in the U.S. Military.  Husband came into the marriage with a piece of land that he purchased and fully paid for years before he even met Wife.  Husband receives news that he is being deployed to a very dangerous area of the world and he is a bit nervous because he does not have a will and he wants to be sure that there is no probate trouble in case he should die while overseas.  In an effort to protect Wife’s financial interests, he quickly adds her name to the deed and goes off to battle.  Husband doesn’t die, but instead is greeted by Wife upon his return, with divorce papers.  Wife says that the husband put the land into joint tenancy because he loved her and wanted to share everything he had with her, just as they had done with everything else that they owned. Is that jointly titled land now considered marital property?

RESULT:  Probably not, if Husband can prove that he put the land into joint tenancy for estate planning purposes only and that he did not intend to make a gift to the marriage of that land.  It would be a matter of proof and a judge’s final determination as to which party was telling the truth.  (VA Code §20-107.3(A)(1)-(3))/

As you can see, the law is very subjective in this area.  This is why clients, in mediation, often do just as good a job at determining whether property should be classified as marital, nonmarital or hybrid property, as do judges.  They know their own history and what was said, implied, reasoned, and what makes sense considering their family financial history and culture.  They know each other and they know what their hopes and dreams are – or at least what they were before the divorce —  for their children and for each other’s future as they get older.  Attorneys’ fees can sky rocket in this area of the law, as you can imagine, because “donative intent” necessary to show when, in fact, a contribution of nonmarital property to marital property is present is a very tricky area of the law.  It involves defining phrases, such as “substantial effort”, and “significant”, which are hardly quantifiable and, instead, rely on subjective standards and skilled gamesmanship in the courtroom.


[1] For a complete listing of the statutory factors that all Virginia judges must consider when dividing and distributing property upon divorce, see my previous blog article What Virginia Divorce Courts Consider When Dividing Property & Debt (10/13/12))

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Separation & Divorce With a Millennial Child Still at Home

June 18, 2013

familiesMany young adult children – known as Millennials (those born between approximately 1982-2004) find themselves in the middle of their parents divorce in more ways than one. It not a new phenomenon that parents wait until their children are grown before they embark on a divorce, but today’s young adults are often still in the nest when this happens relying on their parents for both shelter and financial support.

Why do so many parents get divorced when their children are barely out of their teens or are just beginning their lives as independent adults?  In previous years, many parents have waited until their children left the nest because it was only then, when the intense focus on child rearing disappeared, that the couple realized the extent to which their relationship with one another had changed. Other times, parents notice the changes in their feelings for one another, but agree not to put their children through the emotional turmoil that often accompanies a divorce until after the children are “old enough to understand”.

This latest generation of children crossing the threshold into adulthood, the generation known as “Millennials” and “Generation Y”, is making these sorts of decisions a bit more complicated for parents than had been the case with previous generations. If you are considering a separation or divorce, and have children in their mid-teens to late twenties, here are some things to keep in mind about the way this generation differs from previous generations of young adults and the complications these differences may present in a divorce.

One of the most important factors affecting this generation, and how they go about the business of growing up, is the economic climate that Millennials have inherited.  As we all know, the marketplace is hardly ideal for these young people in terms of finding work. The Millennial Generation is the first generation, since the Great Depression, which, economists predict, will probably do worse, economically, than their parents.

As a result of this, Millennials enter adulthood slower than previous generations — sort of like a “delay” in growing up — because there is not a whole lot to grow up for when there are very few “adult” jobs available.  This means that they are delaying marriage, home-ownership and long-term employment longer than their parents or grandparents did. The Millennial Generation has less financial and job security than previous generations did in their twenties, but they are also the most educated generation in history.  This odd combination not only leads to tremendous frustration for these young people who were told, in no uncertain terms, to “get an education”, but has saddled many of them with tremendous student loan debt. This generation has more debt than any other generation before them due, mostly, to the sky rocketing costs of college and that fact that so many of them have taken their parents advice and gotten their degrees, only to have no where to put their newfound education to work.

The result?  Many Millennials are staying in their parents’ homes longer, or returning to live with them, after finishing undergraduate or graduate school. This is important information for parents considering a separation, because they will also have to take into account where the adult child, who plans on returning home after college or still resides at home (and can’t find work, and is saddled with debt) will go if the family residence is sold? Also, the parents will need to consider how the surmounting expenses that often appear as a result of divorce (e.g. two mortgages/rents, legal fees, etc.) will impact any promises made or expectations (based, perhaps, on what the parents did for an older sibling) regarding financial support, assistance with paying off debt, etc.

Many Boomer and X Generation commentators, (who are the parents of the Millennials), have stated that their progeny are the most coddled generation to date. This may be true, but the main reason for this “coddling” also needs to be pointed out: The parents of Millennial Generation children tended to have fewer children than their parents or grandparents did.  Their energies, focus and emotions were, therefore, all directed toward one or two children. The end result of this “coddling” is not all bad, however, as the Millennials tend to have stronger bonds with their parents which, research shows, leads to better relationship skills as adults.    Unfortunately, however, these stronger bonds may lead to more serious emotional consequences when these young adults have to deal with their parents’ separation and divorce. Parents, therefore, should not expect that, just because their son or daughter is now twenty something, that he or she will accept the news of the intent to separate or divorce lightly.  Divorcing parents with millennial-aged children should be prepared for any number of reactions and need to carefully choose their words when letting the kids know what is happening in terms of how a divorce may affect everyone in the family, both emotionally and financially, and what is expected of the children in terms of helping out financially, finding their own residence despite economic hard times, etc.

Primary Source:  “What It Means to Be a Millennial”, Presented by The Diane Rehm Show February 18, 2013. http://thedianerehmshow.org/shows/2013-02-18/what-it-means-be-millennial

Posted by Zia Meyer, Mediation Assistant (and a Millenial)

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


Divorce Mediator’s Are Focused on One Thing: Settlement

June 11, 2013

Divorce Mediators are trained to assist divorcing clients through the settlement process.  That is all we do — help clients craft fair settlements and write up those settlement terms in clear, legally binding Settlement Agreements. By focusing only on settlement – without the lure and distraction of flashy legal strategies, courtroom drama, and high stakes positional bargaining (often involving your children) – good mediators keep their clients focused on settling their issues, spotting opportunities and moving on with their lives.

I am a Lawyer-Mediator with several years experience in divorce litigation. This type of background allows me, and divorce mediators with similar experience, to bring to life, in real terms, what may happen if the case is not settled in mediation.  For example, 90-95% of divorce cases settle (meaning they do not go to trial). Therefore, doesn’t it make more sense to try to work on settlement first (where you are ultimately headed, anyway), rather than starting the divorce process with an adversarial posture and legal wrangling?  I can tell you, from experience that, in many instances, divorce cases will drag on for months – or even years – and then, on the dawn of trial, after thousands of dollars have already been spent in attorneys’ fees – the case miraculously settles.  The clients are usually worn out and out of money at that point.  Though it shouldn’t get to that point, it is really only the clients that can stop the bleeding, and that is best done by working on settlement first, and using the adversarial system only when necessary.

Lawyer ethics require that lawyers advocate zealously in asserting their client’s position.  This ethical mandate often spins a case out of control when a little bit of thoughtful goal setting and financial planning by the client, with the assistance of a professional mediator, could have avoided expensive and emotionally draining litigation.  Unfortunately, the vast majority of clients are not experienced in what is appropriate and necessary in a divorce case and, therefore, are relying on their attorney to tell them what needs to be done.  The attorney is then stuck between his or her legal mandate to “zealously represent” his or her client, making enough money to pay the huge overhead that many law firms operate under, and doing what is really best for the client in the long run emotionally, financially and for the clients family, as a whole.  Usually, “zealous advocacy” wins out, especially in today’s legal climate where lawyers are suing other lawyers everyday, for malpractice, in the divorce system.

When is it essential to get the Court involved?  Lawyers and judges are usually necessary in cases where there is domestic violence, child abuse, concealment of assets, or an absolute unwillingness or incapacity for a couple to negotiate, even with the assistance of a professional mediator.  But, aside from those circumstances, there is no discernible reason not to try mediation first, before litigation.  Everything is confidential, in mediation, and, if it doesn’t work out, nothing you have said in mediation can ever be used against your interest in a court of law.  You really have nothing to lose but, maybe, a few hundred dollars (versus thousands of dollars, in the types of cases that I usually handle, just for the attorney’s retainer fee).

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Divorce Mediators, in Virginia, are required to be neutral. We do not advocate for either party, but Lawyer-Mediators, like myself, work very hard to ensure that both parties make informed decisions based on the totality of the facts and circumstances presented by their case. Divorce Mediators are permitted to share information, with their clients, in the following areas, where that Mediator has expertise:

  • Divorce law – statutory, case law
  • Divorce trends – local, national
  • Tax implications of divorce (e.g. alimony deduction, capital gains, gift tax laws in relationship to divorce)
  • Retirement funds – Federal law and application, necessary paperwork
  • Military Law as it relates to military retirement and benefits in a divorce situation
  • Federal law as it relates to federal employee’s retirement and benefits in a divorce situation
  • Effect of divorce on children –adjustment, bonding, talking with kids about divorce
  • Effect of divorce on adult children – relationship skills generally, relationship with parents
  • Child support calculations and deviations from those calculations (above and below)
  • Range of custodial care plans and implementation of those plans

Experienced Mediators are also able to share a variety of settlement options that have worked for other divorcing couples who had similar issues.  Mediation is a creative process, but there is no reason to reinvent the wheel if there is a solution out there, already, that can be tailored to the particular clients’ needs.

In mediation, there is usually not much room for old fashioned, strong arm negotiating tactics, such as:

  • An emphasis on the ground of adultery or other behaviorially oriented matters when it comes to settling property disputes;
  • Pushing the envelope to classify money as non marital property (non divisible by Virginia courts) when both parties clearly viewed it as marital property throughout the marriage;
  • Sudden amnesia regarding known underreporting of income by small business owners (for purpose of calculating support);
  • Tying financial issues to matters of custody & visitation; and
  • Involving other family members in the details of the settlement.

Divorce mediators do one thing:  Help clients settle their cases.  We know how to see things from both perspectives and help our clients to do the same.  Spending a little energy trying on the shoes of the other party helps settle cases faster than digging your heels in. Legally trained mediators know what judges can and cannot do, and what a typical settlement looks like in their area of practice.  But, even though good Lawyer-Mediators know what is going on in the Courthouse, the focus, in mediation, is not on the outside world but on what is right for your family and what is best for you.

All Mediations, the way that I practice, have one clear overriding emphasis: To figure out the best way for both parties and the children to be able to live a comfortable, post-divorce life by finding and taking advantage of as many opportunities presented by the couple’s situation as possible. The idea, at the end of a divorce, is to be happier than you were in the marriage.  Why not?  What else do you have if you don’t have that?  Just a divorce, and that is not an acceptable goal for me and is not a goal orientation that I recommend my clients shoot for, either.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator. Robin Graine of Graine Mediation, is a former divorce litigator and has a busy, private divorce mediation practice in Fairfax, Virginia

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


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