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Q: Question about marital property in Virginia ( Answered 5 out of 5 stars,   0 Comments )
Question  
Subject: Question about marital property in Virginia
Category: Relationships and Society > Law
Asked by: fanbelt-ga
List Price: $200.00
Posted: 27 Apr 2006 12:32 PDT
Expires: 27 May 2006 12:32 PDT
Question ID: 723422
I want to know if the following piece of real estate is marital
property, partial marital property or separate property.  I would also
like to know what sort of documentation I would need to prove martial
property if it is such.

Spouse bought house in 1989 for $125k.  We married in 1992.  At time
of marriage, mortgage debt on house was $95k.  Market had declined in
1992 and house fair market value was $115k.

House was principal residence for tax purposes from time of marriage
to 8/1997.  Had overseas assignment from 8/1993 to 1/1997.  House was
used during trips to US.

After 7/1997 property was put in use as a rental property.  Debt is
now completely paid off through combination of mortgage payments, and
several lump sum payments.

All accounting for property was conducted through joint checking
account.  Rent was deposited and mortgage payments were made from
joint checking account.  Taxes, insurance, maintenance, and homeowners
dues were paid from joint account with me writing most of the checks.

I did all taxes and paid some bills.  I painted the house once between tenants.

I would be happy to provide additional information.

Thanks.
Answer  
Subject: Re: Question about marital property in Virginia
Answered By: pafalafa-ga on 29 Apr 2006 11:58 PDT
Rated:5 out of 5 stars
 
fanbelt-ga,

From my reading of Virginia Code and case law, it seems like this
house would, in all likelihood, be considered hybrid property -- part
marital and part separate.

HOWEVER, there are two important caveats to note:

1.  The status of a piece of property such as a house is often
unclear, and sharp differences of opinion can easily arise.  The
ultimate decision as to the status of the house can only be made by
mutual agreement between the spouses involved, or by the courts.

2.  As noted at the bottom of this page, Google Answers is not a
source of professional legal advice.  I am glad to point to resources
on this topic and provide insights from various cases in Virginia. 
But none of this is meant as a replacement for the services of a legal
professional familiar with Virginia law.

Having said that, let's examine some of the resources available.


The actual Virginia law covering the status of property can be seen here:


http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-107.3
 20-107.3. Court may decree as to property of the parties


Some excerpts from the law follow, along with my own comments, shown
in brackets -- there are a number of facets of the law shown here,
though it is probably items (d) and (e) that are most relevant to your
situation:

===============

1. Separate property is (i) all property, real and personal, acquired
by either party before the marriage...
[At first glance, this seems to say that a house purchased prior to a
marriage is separate property...period!  However, a house that is
being paid off by a mortgage has only been partly acquired, and so can
sometimes be considered partly separate and partly marital property --
a category called 'hybrid property']
 

3. The court shall classify property as part marital property and part
separate property as follows:

a. In the case of income received from separate property during the
marriage, such income shall be marital property only to the extent it
is attributable to the personal efforts of either party.
[In other words, the rental income received from the house in question
may warrant status as hybrid property, though there is no guarantee of
this]


In the case of the increase in value of separate property during the
marriage, such increase in value shall be marital property only to the
extent that marital property or the personal efforts of either party
have contributed to such increases, provided that any such personal
efforts must be significant and result in substantial appreciation of
the separate property.
[If the value of the house increased, and if that increase can be
shown to be the result of work put into the house, then the courts may
decide to treat the increase in value as marital property]


For purposes of this subdivision, the nonowning spouse shall bear the
burden of proving that (i) contributions of marital property or
personal effort were made and (ii) the separate property increased in
value. Once this burden of proof is met, the owning spouse shall bear
the burden of proving that the increase in value or some portion
thereof was not caused by contributions of marital property or
personal effort.
[The non-owner has to show that work was put into the house, and that
the value rose.  The owner has the burden to show that the increase in
value was not due to the work put in]



d. When marital property and separate property are commingled by
contributing one category of property to another, resulting in the
loss of identity of the contributed property, the classification of
the contributed property shall be transmuted to the category of
property receiving the contribution. However, to the extent the
contributed property is retraceable by a preponderance of the evidence
and was not a gift, such contributed property shall retain its
original classification.

e. 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.

f. When separate property is retitled in the joint names of the
parties, the retitled property shall be deemed transmuted to marital
property. However, to the extent the property is retraceable by a
preponderance of the evidence and was not a gift, the retitled
property shall retain its original classification.

[Sections d,e, and f above have to do with comingled assets, which
includes the situation of using marital property (money) to pay off
debt on a separate property (a mortgage that existed prior to the
marriage).  These sections are classic legalese, and almost impossible
to make any clear sense out of.  Fortunately, there are resource
offering some 'translations' and I'll get to these below].

===============


It's worth having a direct link to the law itself as a matter of
reference, but it's probably easier to rely on some plain-English (or
at least, plainer-English) resources to understand what's what.

One such resource is here:


-----
http://www.divorcenet.com/states/virginia/va_faq02
Virgina Property FAQ's

What about my house?

If the house was acquired during the marriage, it is considered
marital property unless it was purchased by one spouse with entirely
separate funds, and only that spouse appears on the title. If the
house was acquired by one spouse prior to the marriage, it is that
spouse's separate property unless marital income has been used to pay
the mortgage or the house became jointly titled.
-----


So you can see that a house owned by one spouse before a marriage can
become wholly or partly marital property under either of two
conditions:  the non-owning spouse's income contributed to paying down
the mortgage, or the house was put into joint title.



The case that is often cited as precedent on matters like these is Moran v. Moran:



http://caselaw.lp.findlaw.com/data2/virginiastatecases/2543973.doc
DIANE L. MORAN v. CURTIS E. MORAN


and here again are some excerpts along with my bracketed comments
(there are numerous issues discussed in the case...I've concentrated
only on the house and mortgage paydown issue):


===============
...Wife contends the trial court erroneously classified her separately
owned rental house, known as the "Berkshire house," as hybrid
property, and unfairly distributed the marital portion of husband's
defined contribution pension plan...
[This is one of the issues the court was asked to address]

...In 1983, when the parties married, wife owned the Berkshire house
that she had purchased in 1978 for $ 27,900...The Berkshire house was
their marital home from 1983 to 1990, at which time they purchased
another home and leased the Berkshire property. When the parties
separated, the fair market value of the Berkshire home was $ 58,500.
The parties still owed $ 18,533 on the original deed of trust and $
11,079 on a home equity loan, resulting in net equity of $ 28,888.
During the marriage, the parties spent $ 30,000 of marital funds
renovating the Berkshire property and used marital funds to make the
monthly payments on the deed of trust...
[The above is the court's summary of the situation regarding the
wife's property, and the use of marital funds to pay down the
mortgage]


...Property that is acquired by either party before the marriage...is
separate property...subject to...being transmuted into hybrid property
-- that is, part marital and part separate...by having been commingled
with marital funds when the marital funds can be retraced...
[This is the court restating some of the co-mingling sections of the
law that I cited earlier]

...In classifying the Berkshire property, we next consider the
expenditure of marital funds to pay the original deed of trust.
Because marital funds were used to pay the mortgage, the trial court
did not err in classifying the Berkshire property as hybrid, that is,
part marital and part separate.
[There you have it...if both parties are paying the mortgage, then it
may well be appropriate to consider the house as hybrid property]


...Here, the husband's evidence proved that at the time of marriage,
the unpaid balance on the mortgage was $ 24,000 to $ 25,000, that
during the marriage the mortgage was paid with marital funds, and at
the date of separation the unpaid balance on the mortgage was $
18,533. The husband's evidence proved a reduction in mortgage
principal of approximately $ 6,000 through the expenditure of marital
funds. Therefore, in paying the mortgage obligation with marital
funds, the Morans acquired value in the Berkshire property...
[This is important to note!  Paying off the prinipal on the house with
marital funds(rather than the interest)is a key consideration for the
courts]
  

...the husband did present sufficient evidence to establish that a
portion of the equity in the Berkshire property could be traced to
marital funds. Accordingly, the...trial court did not err in
classifying the Berkshire house as hybrid property...
[They're reiterating here, that it's the equity in the house that's a
key consideration]
===============



From the information you provided in your question, it seems clear
that the homeowning spouse probably had a reasonable amount of equity
in the house prior to the marriage, but that a substantial amount of
additional equity was acquired during the marriage via payments from a
joint checking account.

By me reading of the situation, this is a likely case for treating the
house as hybrid property, where the court's would decide the relative
amounts that accrue to each spouse.


I hope I have presented this clearly, and provided the information you need.

However, if there's anything more I can do for you, please let me know
by posting a Request for Clarification, and I'll be happy to assist
you further.


Best of luck,

pafalafa-ga


search strategy -- Searched Google and legal databases for: [ virginia
case law "marital property" mortgage ]
fanbelt-ga rated this answer:5 out of 5 stars and gave an additional tip of: $20.00
Exact case law.  Well organized. Great commentary.

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