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Waste, Separate Property, and Deviation from the Standard Calculation in Washington Divorce

High-asset divorces are very complex and difficult matters.  It is not uncommon for one party to allege the other has either wasted or hidden assets.  Additionally, the standard calculation may not be an equitable way to determine the appropriate amount of support, so the court has some discretion to deviate from the standard if it considers the appropriate factors and makes findings of fact.

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A Washington appeals court recently considered waste, separate property, and a possible deviation from the standard distribution calculation in In re Marriage of Hansen. The couple married in 2001, and the decree was issued in 2015.  The couple had two children.  The husband owned and operated a bail bond company, which was the couple’s primary source of income.  The wife did not work outside the home and had been financially dependent on her husband well before the marriage.

In 2013, the husband purchased another bail bond company, for which he paid partially with funds from shared retirement accounts.  The couple incurred early withdrawal fees and taxes of more than $120,000.

Later that year, the wife filed for divorce.  The court found that a 50/50 division of the couple’s estate was fair and equitable.  The court awarded the business and other assets to the husband, ordering him to make a cash payment of nearly $600,000 to the wife.  The court also awarded $20,000 per month maintenance payments to the wife for 60 months.  Additionally, the court found the husband had wasted community assets when he withdrew the retirement funds.

A trial court may consider waste or concealment of assets when distributing the property in a divorce.  In this case, the court considered the taxes and penalties the husband incurred for the early withdrawal of the retirement funds as a pre-distribution of community assets to the husband.  Half of the amount was deducted from his share of the distribution of assets.  The court also found that the estate had minimal liquid assets, due to his “actions in contemplation of divorce…”

There was testimony that the decision to withdraw the funds was appropriate because it allowed the husband to obtain a new branch that had an expected return that would be higher than that of the retirement account.  There was also testimony, however, that the couple owned property and could have financed the purchase through other sources that would not have resulted in penalties.  The wife testified that she had agreed to the withdrawal but did not know the consequences.

The trial court found that the withdrawal of the funds depleted liquid assets while the divorce was contemplated.  A shortage of available funds puts the party who is not in control of the income at a disadvantage during the divorce.  The appeals court found that it was reasonable for the trial court to find that the withdrawal and the resultant taxes and penalties were “negatively productive conduct,” considering the relative position of the husband and the wife at the time the divorce was filed.

The husband argued that his actions could not be considered waste because his wife agreed to them.  The appeals court noted that the wife’s agreement to the actions was a factor to be considered but not a dispositive one.  The court pointed out that it was unclear whether the wife truly understood the withdrawal and its consequences, or whether she had any real ability to influence the decision.

There was testimony that the couple had separated in April 2013 and reconciled in May, although the husband denied reconciling to get his wife’s agreement to the transactions related to purchasing the other business.

The appeals court found that the trial court’s findings regarding the withdrawals were supported by the substantial evidence presented in the case.

The husband also argued that his separate property, valued at more than $170,000, should not have been included in the valuation of the bail bond company, which was determined to be community property.  The appeals court pointed out that the trial court has broad discretion in property distribution, using the factors in RCW 26.09.080.  In Washington, the court has the ability to distribute all of the property, both community and separate.  The trial court acknowledged that it was including the separate property, and it determined that the distribution was fair and equitable.  The husband did not show that the distribution was not based on the statutory factors or was an abuse of discretion.

The husband also challenged the child support order.  RCW 26.19.020 provides a statutory table that sets forth presumptive amounts of child support based on combined parental income, up to $12,000.  In this case, the child support payment under the standard calculation would have been $1,709.  The combined parental income here was greater than $12,000, so the court may exceed the presumptive amount upon written findings of fact.  The minimum factors to be considered are the standard of living and the children’s needs.  The husband argued that the judge’s comments during the proceedings showed that he had not considered the appropriate factors.  The appeals court noted, however, that the written findings are what matter in determining if the factors were considered.  The trial court listed four reasons for deviating from the standard calculation:  combined parental income exceeding $12,000, children’s needs and historical expenses related to the children, tax planning, and wealth.  The husband argued that the findings were cursory and did not satisfy the standard.  The appeals court noted that “the children’s needs” was a listed reason for the deviation.  It interpreted “wealth” as consideration of the standard of living, but it also noted that the court had noted the couple had a high standard of living in another section.  The trial court also found that the wife’s reasonable monthly expenses, including those related to the children, were $24,000.  The appeals court found the findings were sufficient to show the court based its deviation on the appropriate factors.

This case really illustrates how much discretion the trial court has regarding asset division and support.  The court may be required to consider certain factors and make fact findings, but those findings do not always have to be detailed.

If you may be facing a divorce, you need an experienced and aggressive Washington high-asset divorce attorney on your side.  Call us at (206) 622-6562 or contact us through our website to schedule a consultation.

More Blog Posts:

Issues that May Arise in Dissolution of Marriage When One Spouse Owns a Business

Property Divided Upon Dissolution

Image: FreeImages.com / Søren Follmann

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