Marital and Separate Property

What determines whether property owned by a party to a divorce is marital property (available for division with the other spouse) or separate property (not available for division)? The Alabama Court of Civil Appeals shed some light on the question in Kaufman v Kaufman, Case No. 2040100 and 2040276 (Ala. Civ. App. December 30, 2005).

The parties had been married for 33 years but had no children together. At the time of the divorce, the husband was 87 and the wife 66. The wife testified at trial that neither spouse had significant assets at the time of their marriage, and the husband offered no evidence that her statement was incorrect. The couple separated in 2003, and soon thereafter the husband withdrew more than $50,000 from their joint checking account and gave it to his adult daughter.

The trial court awarded to the wile assets worth approximately 23% of the value of the marital estate and to the husband assets worth approximately 77%. As rationale for doing so, the trial court indicated that it was aware the husband had made “a very reasonable” offer to the wife “and she turned it down.” The trial court ordered the husband to pay the wife alimony of $500 per month for five years.

The appeals court rebuked the trial court for considering the parties’ settlement negotiations in its award.

Any evidence pertaining to offers of compromise between the parties is not admissible. Super Valu Stores, Inc. v. Peterson, supra. Our supreme court has explained that “the rationale and public policy underlying the privileged nature of settlement negotiations is the encouragement of extrajudicial settlement of disputes.” Super Valu Stores, Inc. v. Peterson, 506 So. 2d at 324. It is axiomatic that the trial court may not obtain information on its own that would be inadmissable if presented to it by the parties. Therefore, the trial court’s consideration of the parties’ settlement negotiations in reaching those portions of its judgment pertaining to the property division and alimony award was improper.

The appeals court also took issue with the trial court’s method for deciding what was marital property and what was the husband’s “separate estate.” Here’s the appeals court’s statement of the law about marital and separate property, from Nichols v. Nichols, 824 So. 2d 797, 802 (Ala. Civ. App. 2001):

A party’s ‘”separate estate” is that property over which [he or] she exercises exclusive control and from which the [spouse] … derives no benefit by reason of the marital relationship.’ Gartman v. Gartman, 376 So. 2d 711, 713 (Ala. Civ. App. 1978). The separate estate of the parties in a divorce proceeding includes property owned prior to the marriage and property received by gift or inheritance during the marriage. § 30-2-51(a), Ala. Code 1975. Although marital property generally includes property purchased or otherwise accumulated by the parties during the marriage, it may also include the property acquired before the marriage or received by gift or inheritance during the marriage when it is used, or income from it is used, regularly for the common benefit of the parties during their marriage. See § 30-2-51(a), Ala. Code 1975.

The appeals court quoted the trial court’s statement in open court that “I’ll consider any joint account as far as division of property,” “if [the wife] is claiming [an interest in one of the accounts], then she needs to show whether or not she made any contributions to it,” and “I am getting a feeling that he contributed most of the money during the marriage.”

Then the appeals court summarized the mistakes the trial court made:

In this case, the parties were married for 33 years. They are both at or nearing retirement age and are receiving retirement income. The trial court’s comments made during the course of the hearing indicate that it considered primarily the husband’s financial contributions to the marriage and placed little value on the wife’s contributions, both monetary or otherwise, to the marriage. The trial court appears to have improperly determined that the assets listed [the exhibit relied on by the parties] were not all marital assets. In addition, we note that the trial court improperly considered the parties’ settlement negotiations in reaching its division of the parties’ marital property and in its alimony award. The trial court’s property award disproportionately favors the husband, and, given the foregoing and the length of the parties’ marriage, we must conclude that the trial court abused its discretion in reaching its property division and alimony award. We reverse and remand for the trial court to enter a judgment fashioning an equitable property division and alimony award.