Property in a Washington divorce is generally characterized as of the date was acquired, but the date of acquisition alone does not determine its character. The court must consider whether the property was acquired by community or separate funds. Additionally, spouses may agree to convert property that otherwise would have been separate property. A husband recently challenged a trial court’s characterization of certain assets and expenditures.
The appeals court’s unpublished opinion states the parties got married in 2004 in Arizona. Several years later, they signed a family trust agreement stating any property put in the trust would be community property. They bought a home in Washington in the name of the trust and moved into it in 2009. They subsequently rented that home out when they purchased another home, using funds from the trust for the down payment. The husband placed $820,000 he received from an arbitration related to his shares in his former employer in the trust’s bank account. The parties funded a new business from the trust. The business was successful, but closed in 2020 when its supplier went out of business.
The wife and child moved out in 2017 and the husband filed for divorce.
Following a bench trial, the court found the remaining funds from the husband’s arbitration award were community property because they were placed in the trust. Similarly, the houses were community property because they had been bought during the marriage with funds from the trust.
The court also found the business was a community asset because it was funded by the trust and both spouses had contributed to its success. The trial court could not place a value on it because it was no longer operating at the time of the decision, but found the husband had issued checks to himself and used the business’s accounts to pay his personal expenses. The husband argued he was repaying himself for a loan he had made to the company, but the trial court did not find him credible.
The trial court awarded one home to the wife, making her responsible for the mortgage. The other home was to be sold and the proceeds equally divided.
The trial court acknowledged its property division was not equal, but determined it was just and equitable because the husband had used money from a community asset for his own expenses. The trial court also found the division was equitable because the husband’s future earning potential was much greater than the wife’s.
The Husband’s Appeal
The husband appealed, arguing the trial court erred in characterizing certain assets and expenditures as community property when they could be traced to transactions occurring after the separation.
The appeals court first considered the deposits and expenditures from the business’s bank account. The husband did not challenge the trial court’s conclusion that the business was a community asset or the supporting facts. The appeals court noted that the business maintained its original character after the separation, unless there was direct evidence to the contrary. The appeals court also noted that when separate funds were so commingled with community funds that they could not be distinguished or apportioned, then the commingled funds are community property.
The trial court could not award the defunct business to either party, but its characterization was relevant because the husband had dissipated community assets from the business after the separation. The trial court may consider dissipation of community assets in determining a just and equitable property division. The trial court found the husband had regularly paid his personal expenses from the business’s funds from 2017 to 2020. The trial court also found his personal expenditures were so commingled with the business that it could not distinguish what belonged to the community. The appeals court determined it was proper for the trial court to assign the value of the dissipated assets to the husband to determine the amount of community property that should have been in his possession if he had not used it for his personal expenses.
The trial court then considered transactions made with the husband’s credit cards. The trial court had found the husband’s AMEX card was used to charge expenses after the separation and was paid with funds from the business’s account. The appeals court determined this finding supported the trial court’s conclusion that the purchases on the court were a dissipation of community assets.
The trial court found the husband’s other credit card had been partially funded by the business account. The court also found there had been “many unexplained deposits” into the husband’s account. The trial court further found the husband had not been an “accurate record keeper” and had regularly commingled funds. The husband had not challenged that finding. The appeals court found no error in the trial court’s finding the husband had used the credit cards to dissipate community assets.
The husband also argued the trial court abused its discretion by making a distribution that was not just or equitable because the wife received about ¾ of the community property.
A trial court has broad discretion in dividing property. The trial court must consider certain factors in making an equitable property distribution, including the nature and extent of both community and separate property, the length of the marriage, and the spouses’ economic circumstances. RCW 26.09.080. The trial court may also consider waste or concealment of assets in weighing those factors. An equitable division does not have to be equal, but instead must be fair based on the circumstances and the spouses’ future needs.
The appeals court noted the parties “had a high standard of living . . .” The husband had received $820,000 in the arbitration award and the parties’ business was successful until the supplier closed. They owned two houses. The appeals court noted there should have been “a significant amount of community property. . .” The trial found the husband dissipated at least $319,000 during the separation, but stated the true amount was likely much higher. After the separation, the husband was earning about $15,000 per month, but the wife was not even earning a third of that. The husband had about $240,000 in retirement accounts, a truck, a motorcycle, and a car. The wife only had a vehicle as her separate property. The trial court acknowledged the distribution was not equal, but concluded the division was fair and equitable because the husband had dissipated funds and had a much greater future earning potential. Additionally, each party was awarded all of their separate property, but the husband had a significantly greater amount of separate property. The value of the property awarded to each party was therefore approximately equal. The appeals court found no abuse of discretion in the unequal distribution.
The appeals court affirmed the trial court’s judgment and awarded the wife attorney fees.
Call a Skilled Washington Divorce Lawyer
Significant assets can make a divorce more contentious. If you are facing divorce with a business or other complex assets, you need a knowledgeable Washington family law attorney on your side. Call (206) 622-6562 to schedule a consultation with Blair & Kim, PLLC.