The court in a Washington divorce case has broad discretion in characterizing the parties’ assets. Characterization is determined as of the date of acquisition and generally does not change. Separate property continues to be separate while it can be traced or identified. Property acquired during the marriage may be separate property if it was acquired with the traceable proceeds of a spouse’s separate property. There is, however, a presumption that property acquired while the parties are married is community property. A spouse claiming that property acquired during the marriage is separate has the burden of showing it is separate through clear and convincing evidence. In a recent unpublished case, a former wife challenged the characterization of property purchased during the marriage.
Before the parties got married in 1999, they signed a prenuptial agreement stating the husband would maintain ownership of the property he had at the time of the marriage. He owned property in Montana before the marriage.
The parties divorced in 2002. The court awarded the husband the property he owned when they got married in accordance with the prenuptial agreement.
The parties remarried in 2003. They moved to the Montana property during the marriage and lived there for several years. The property was subsequently sold for about $1.7 million. They bought another home in April 2012 for $525,000.
The parties separated again in 2022 and the husband petitioned for divorce. The wife’s financial expert opined that that he could not “find a readily traceable connection. . .” between the sale and the purchase. His report did state, however, that the timing of the sale of the Montana property and purchase of the home indicated “a relationship continuing the separate property claim.” When asked where they got the money to buy the home, the wife answered “[w]hen we sold [the Montana property].”
The trial court found the testimony and report of the wife’s expert indicated there was a relationship between the sale of the Montana property and purchase of the home that supported the husband’s separate property claim. The trial court concluded the home was the husband’s separate property but awarded the wife 50% of its increase in value since the purchase date.
The court denied the wife’s motion for reconsidering and she filed an appeal.
The appeals court concluded there was substantial evidence supporting the court’s findings. The husband owned the property in Montana at the time of the marriage, so it was his separate property. The home was purchased during the marriage, giving rise to the presumption that it was community property.
The appeals court noted that a “single credible witness” can be sufficient to rebut the presumption. In re Schwartz. In this case, the report and testimony of the wife’s expert supported the husband’s separate property claim. The appeals court determined that the findings were supported by substantial evidence and that the findings supported the conclusion that the funds used to buy the home were the husband’s separate property before the purchase.
The appeals court rejected the wife’s argument the property was community property because the funds from the proceeds of the sale were commingled. The appeals court noted that commingling of community and separate funds may give rise to the presumption that the funds are community property. The commingling, however, must constitute “hopeless commingling” where it is impossible to trace the funds. The appeals court determined that tracing was possible in this case, based on the expert’s report regarding the timing of the sale and purchase. Additionally, the wife had testified they used the funds from the sale of the Montana property to buy the home. The appeals court concluded that the wife’s testimony and expert’s report, when viewed in a light most favorable to the husband on appeal, “ma[d]e it highly probable” the husband’s separate funds from the sale of the Montana property were used to buy the home.
The wife also argued the husband intended to convert the home to community property. She pointed to his intention for her to live in the home, putting her name on the deed, and not having a prenuptial agreement for their second marriage. The appeals court noted that case law has held that whether both spouse’s names are on the deed is not determinative of the property’s character. The appeals court also rejected the argument regarding the lack of a prenuptial agreement, pointing out there was no evidence the husband intended to change his separate property to community property. The appeals court found there was not sufficient evidence the husband “intended to transmute the character of the property. . .”
The appeals court concluded the trial court did not err when it characterized the home as the husband’s separate property and affirmed the judgment.
Characterization of property can be a contentious issue in divorce cases. If you are anticipating the end of your marriage, a knowledgeable Washington divorce attorney can advise you of your rights and help you protect your property. Set up a consultation with Blair & Kim, PLLC, by calling our offices at (206) 622-6562.