Where to look for hidden assets before a divorce

Many times, people plan for a divorce for a long time. Often one spouse, often the wife, knows very little about the family's finances. Do they have investments? She doesn't know. Do they own stock? She doesn't know. Does her husband have a pension? She doesn't know. Often, valuable assets are not distributed to the wife because she doesn't know they exist and more often then not, the husband or the one hiding the assets, lies about it in the divorce so the assets are not discovered.

Here are some practical ways to see if financial information or assets are being hidden from you or to make sure you know what you have. First, NEVER sign a tax return without reviewing it. How much income is your spouse making? Is there ANY money indicated as income in the "interest and dividend" section? If so, there are investments of some kind. Are there any schedules attached to the tax return that you are not familiar with like Schedule C for businesses or K-1s for partnerships? Make a copy of each years tax return and keep it in a safe place. I suggest you let a family member or friend hold this type of important fnancial information.

Second, review your bank statements. Make sure you understand each transactions. Are regular monthly payments going to an entity you are unfamiliar with? Places like T Rowe Price, Fidelity, E Trade, Vanguard and others may indicate stock or mutual fund purchases. Look at your spouses paychecks. Is he or she investing in anything?

You may think your spouse does not have a pension because you have never seen a statement for it. Most companies do NOT send annual pension statements. They may never send any at all. Yet a pension is often the single most valuable asset in a marriage. If your spouse is entitled to just $500 per month, that amounts to $6,000 per year over an average 20 years or $120,000. One-half of that money may be yours. The marital share is one-half of the amount accumulated over the marriage.

NEVER sign any kind of written agreement without consulting an attorney first. You may be waiving your right to a pension or investment that you don't even know exists. You can google where your spouse works and see if they offera pension. Also, sometimes there is a statement for a pension like with the Virginia Retirement System and it shows a "cash value." Bear in mind that the "cash value" often has little relationship to the actual value. In the example above showing $120,000, the cash value may be $15,000. There is no comparison between the cash value and the pay out amounts, so if it exists you need to know and understand what the pension benefits are before deciding whether you are waiving them or getting your share.

If your spouse is secretive about his or her income or finances, there is usually a reason. If your spouse is self-employed and shows little taxable income but spends a lot paying bills etc. then he or she is probably hiding money. Try to pay attention to the financial aspects of the marriage so you have a good idea of what you own should a divorce or even a death occur. Again, never sign anything without seeing an attorney and finding out what your rights are. I can't emphasize how many hundreds of clients I have counseled that have no idea how much property their spouse has even though they have been married a long time.

What Constitutes Separate Property in Virginia?

Separately owned property does not automatically become marital upon marriage, even when it is placed into joint names. If one party invested separate funds into a marital asset, if they can trace out or prove that investment, they may be entitled to a return of the asset or the amount invested plus appreciation. This is a substantial issue in many cases.

The goal of the tracing process is to link every asset to its primary source, which is either separate property or marital property. Harris v. Harris, 2004 Va. App. LEXIS 138 (2004). See also Mann v Mann, 22 VA. App 459; 470S.E. 2d 605, 1996, holding that the interest passively earned on the husband’s premarital assets are separate.

The Code of Virginia, §20-107.3(A)(1)(iv) defines “separate property” as “that part of any property classified as separate pursuant to subdivision A.3. Code of Virginia, §20-107.3(A)(3)(e) provides that “when marital property and separate property are commingled into newly acquired property resulting in the loss of identity of the contributing properties, the commingled property shall be deemed transmuted to marital property. However, to the extent the contributed property is retraceable by a preponderance of the evidence and was not a gift, the contributed property shall retain its original classification.” (emphasis added). Code of Virginia, §20-107.3(A)(3)(g) provides that section (e) of this section shall apply to jointly owned property. No presumption of gift shall arise under this section where (ii) newly acquired property is conveyed into joint ownership.

The increase in value of separate property during the marriage is separate property, unless marital property or the personal efforts of either party have contributed to such increases and then only to the extent of the increases in value attributable to such contributions. The personal efforts of either party must be significant and result in substantial appreciation of the separate property if any increase in value attributable thereto is to be considered marital property. See Code of Virginia, §20-107.3(A)(3)(a). All of the increases of the real estate in this case are attributable to market fluctuations.

Tracing involves a two-prong, burden shifting test. First, a party has to prove he invested separate property into the real estate, which he did. It is undisputed that all of the money used to purchase the real estate was his traceable separate property. Then the burden shifts to the Complainant to prove, by clear and convincing evidence, that the transmutation was a gift. There is no presumption of a gift that arises from the fact that one party put the real estate in the parties’ joint names. If the party claiming a separate interest proves retraceability and the other party fails to prove transmutation of the property by gift, "the Code states that the contributed separate property 'shall retain its original classification.
            The second issue is the passive appreciation in the value of the jointly titled real estate. Pursuant both to Virginia Code Va. 20-107.3(A), and using the Brandenburg formula, which has never been held erroneous by the Virginia appellate courts, (See Turonis, Supra) All of the passive appreciation on a party’s separate investment in real estate is also separate property. By contrast, although the customary care, maintenance, and upkeep of a residential home may preserve the value of the property, it generally does not add value to the home or alter its character. Martin, Supra.  The Court held that the Wife's evidence that at some time during the twelve years of marriage she personally painted, wallpapered, and carpeted parts of the house does not prove a "significant" personal effort.” These activities constitute part of the customary maintenance and upkeep that homeowners typically perform in order to preserve the home's value; they do not by their nature impart value to the home. Courts have held that the trial judge has a duty "to determine the extent to which [a spouse's] separate property interest in the home increased in value during the . . . marriage."
In the case of Hargrave v. Wienckowski, 2000 Va. Cir. LEXIS 208, the Court states that “traceable separate property that is commingled with marital property, whether to acquire new property or otherwise, is subject to being restored to the contributing party.” The Court analyzes the issue and finds that “parties are under no requirement to contribute their separate property, whether acquired before or during the marriage, to the marriage. If a party does so, he or she does so voluntarily and should be reimbursed for it unless the party intended to make a gift of such property to his or her spouse.” This holding is consistent with the purpose of the Virginia legislature in enacting the equitable distribution law which was to give courts power to compensate a spouse for his or her contribution to the acquisition of property obtained during the marriage.

If tracing separate property is an issue in a case, records proving the separate ownership are very important. Records include bank accounts, HUDs, deeds, mortgage and payments. Property acquired during the marriage or jointly titled is presumed to be marital without proof of a separate investment or ownership. Of course, the easiest way to resolve this issue is a prenuptial agreement.

When does adultery bar spousal support in Virginia?

In Virginia, a spouse is often entitled to spousal support when the other spouse makes significantly more gross income. A rule of thumb is that if one spouse makes 70% or more of the amount earned by the other spouse, there is generally no spousal support awarded. If they make less, than the spouse earning less income can be entitled to spousal support.

Virginia recognizes three types of spousal support: pendent elite, temporary, and permanent. Pendente lite spousal support is spousal support awarded while a trial is pending or after separation and before divorce. Temporary support is also known as defined duration support and can be awarded for up to 50% of the time the parties were married and together. Permanent support is just what it sounds like: permanent or until one of the parties dies or the one receiving spousal support remarries or cohabitates with another person for over a year. Pendent elite is calculated based on a formula (usually the Fairfax Guidelines) while temporary and permanent support is not. Adultery can be a bar to most types of spousal support although not usually pendente lite.

Virginia Code § 20-107.1(B) provides that "no permanent maintenance and support shall be awarded from a spouse if there exists in such spouse's favor a ground of divorce under the provisions of subdivision (1) of § 20-91," which includes adultery. The bar, however, is subject to one exception: that the court may make such an award notwithstanding the existence of such ground if the court determines from clear and convincing evidence, that a denial of support and maintenance would constitute a manifest injustice, based upon the respective degrees of fault during the marriage and the relative economic circumstances of the parties.

Adultery as grounds for divorce in Virginia

Virginia still recognizes fault grounds for divorce, and adultery is the only one that does not require any waiting period. If you can prove your spouse committed adultery by “clear and convincing evidence,” you can get an immediate divorce. Virginia Code Annotated Sections 20-91(A)(1) is the law providing adultery as a ground for divorce and Section 20-94 provides that it must be within five years of filing suit without any cohabitation after finding out about the adultery.

While adultery eliminates the 6 or 12 month waiting period for a divorce based on separation, it may not make a difference regarding equitable distribution of property unless there is an “economic impact.” Examples of economic impact include things like your spouse spending marital money or income on his or her lover. While the law requires an economic impact, many judges take adultery into account as a negative contribution to the marriage. Also, it is specifically relevant to the consideration of spousal support. If the spouse who wants support commits adultery, they are barred from support unless the other spouse has also cheated or unless it creates a “manifest injustice.” A manifest injustice means it is unfair to deny spousal support. This could be because the cheating spouse has given up a career to stay at home for the sake of the family or because the cheating spouse was physically abused by the other spouse. The determination of manifest injustice is usually fact specific and decided on a case by case basis.

If one spouse committed adultery and both parties want a divorce and just don’t want to wait the 6 or 12 months required, an uncontested divorce can be obtained on the grounds of adultery if the paramour is willing to sign an affidavit admitting to the sexual relationship.

What kinds of custody are available in Virginia?

What kinds of custody are available in Virginia?

Custody is divided into two types: legal custody and physical custody. Legal custody means the right to participate in major decisions affecting the child like educational, medical, and religious. Physical custody is the right to the child itself or what most people think of when they think of custody.

Primary physical custody is also called primary residence and primary care and is usually the parent the child resides mostly with. Virginia prefers that parents share joint legal custody with primary physical custody being in one parent or the other. However, if there are problems of abuse, drugs, or alcohol, joint legal custody will probably not work. Even if parents share joint legal and physical custody, it doesn’t mean they have equal 50-50 time with the child. Parents can share custody and design a schedule that works best for the child with or without it being 50-50.

A typical schedule provides time with the non-custodial parent every other weekend, usually Friday through Sunday, one night or evening during the week, shared or alternating holidays and the child’s birthday, and one or two weeks during the summer.

Shared custody can be week on, week off, alternating weekends with each parent having two days during the week, or 3 days on 4 days off then switch.

Child support is often paid even when there is 50-50 time with the child depending on the parents’ relative gross incomes. Gross income includes all income from every source for determination of child support.

If you can’t afford health insurance for your child, you should investigate Virginia’s FAMIS program. You can find information about FAMIS at:

http://www.famis.org/

Child support calculations are by the Virginia Guidelines. You can calculate your own using information found at:

http://www.dss.virginia.gov/family/dcse_calc.cgi