§ 8.08 Other Property Interests

JurisdictionUnited States
Publication year2021

§ 8.08 Other Property Interests

[1]—Saved Family Support Payments

A Missouri court held that money saved by a spouse during marriage from child support that she received from a third party should not be included in the marital estate.477

[2]—Litigation Recoveries

A spouse might recover proceeds during marriage from lawsuits against third parties relating to claims other than personal injury claims.478 In a West Virginia case, a spouse received a recovery during marriage based on fraudulent auto loan practices by someone who sold him a car. The court concluded that these funds were marital.479

As set forth above in Section 8.01, under the majority approach a divorce court analyzes the character of a litigation recovery based on what the recovery was intended to replace. To the extent it was to replace an asset that would have been marital, such as lost wages during marriage, the recovery will be considered marital. To the extent that the recovery was intended to compensate the plaintiff spouse for something personal, the recovery will be considered separate.

In a Texas case, the husband filed a lawsuit before marriage regarding a real estate dispute. He obtained a recovery during marriage, and the recovery included an amount for prejudgment interest. The court held that the recovery of the damage claim was separate property, but that the portion of the prejudgment interest that accrued during marriage was marital, because income from separate property in Texas is marital.480

A recovery for loss or damage to separate property is the separate property of the spouse who owned the property,481 while a recovery for loss or damage to marital property is marital.482

A Missouri case involved a spouse's wrongful termination claim. The court held that, because the claim arose during marriage, it was presumptively marital. The husband had the burden to establish what portion of the damages should not be deemed marital. He did not do this, so the court ruled that any proceeds would be marital.483

Similarly, a Tennessee court held that a products liability recovery settled during marriage was presumptively marital property. Because the husband did not introduce evidence to rebut the presumption, it was 100% marital.484

A Utah court held that all of the proceeds of the husband's civil rights lawsuit were marital property. The court found that there was no evidence that any of the recovery was for pain and suffering, and the husband did not show that any damages were personal to him.485

An Alaska court found that a recovery for sexual-harassment was partly marital to the extent the recovery was for lost earnings during marriage, and the remainder was separate property for pain and suffering.486 In a Missouri case, the wife was fired from her job during marriage. Before divorce, she sued her employer for employment discrimination, alleging various forms of damage, such as lost past and future income, humiliation, mental distress and harm to her reputation. The appellate court affirmed the ruling of the trial court that the husband was entitled to a portion of any recovery. The appellate court stated that, while Missouri applies the "analytic" approach to litigation recoveries, the wife had not argued at trial which portions of the award should be considered her separate property. Therefore, all the recovery should be treated as marital.487

An Ohio case involved a breach of employment contract case. During marriage the husband signed an employment agreement for three years, beginning January 2001. Seven months later, he was fired. He sued for breach, claiming both lost wages and lost reputation. The suit eventually settled, and the husband received a certain specified amount for loss of reputation and a certain amount for lost income. Under an analytical approach, the loss of reputation damages were considered separate. As to the loss of income, the court found the parties separated during the summer of 2002, and that they stopped accumulating marital property at the end of September 2002. The claim for lost wages was for the period between September 1, 2001 and December 2003. So, the court determined that, based on a time allocation, the lost wages component should be 13/28 marital, because the spouses were married and accumulating marital property for thirteen months of the twenty-eight-month period. The marital claim was reduced by a proportionate share of legal fees and expenses.488

An Ohio court of appeals held that an employment discrimination recovery was marital property.489 The appellate court noted that no evidence had been introduced to rebut the presumption that all property acquired during marriage is marital property. In addition, the court noted that the recovery presumably would compensate the spouse for lost wages during marriage, which would be marital property under the analytical approach.

Another Ohio case held that, where a spouse settles a lawsuit during marriage, and the recovery contained both a marital and a non-marital component, if the recipient spouse cannot show how much is non-marital the court should treat it as all marital property.490

A Kentucky divorce case involved the husband's recovery against his employer for wrongful termination. The appellate court ruled that the court should apply an analytic approach to determine what portions of the recovery should be considered marital.491

In a Florida case, a stockbroker stole $8 million from the husband's separate property investment account. The amount that the husband recovered from the brokerage for this loss ($5.6 million) was held to be his separate property, as an asset received in exchange for his separate property.492

In a California case, the court ruled that a legal malpractice recovery by the wife was her separate property.493

In a Maryland case, a spouse settled an employment discrimination claim during marriage. The claim had both marital and non-marital components, but the settlement document did not allocate what amount was allocable to each claim. The appellate court instructed the trial court on remand to allow the parties to establish, under the analytical approach, what portion should be considered marital and non-marital.494 The marital portion would be the portion that compensates the spouse for lost wages during marriage.

In a New York divorce case, during the marriage one of the parties had settled a claim for wrongful termination by his employer. The appellate court remanded the matter to the trial court, so the court could apply the analytical approach toward determining the character of the settlement.495

An Alaska case involved a wrongful termination settlement in which the husband filed the lawsuit and claimed both economic and noneconomic damages. The settlement agreement stated that the payment was solely for mental anguish. The Alaska Supreme Court held that the divorce court was not bound by the recital in the settlement agreement, and the matter was remanded to the divorce court, so the court could determine the extent to which the settlement was to repay the economic loss.496

In a Rhode Island case, the husband had an employment dispute with his employer. It was settled just before the parties divorced. The court ruled that the settlement should be considered marital property because the money received was intended to replace lost wages during marriage.497

In an Ohio case, during marriage the husband sued his daughter to collect some marital funds he had loaned her. The court held that any proceeds recovered would be marital.498

A Pennsylvania court ruled that funds received by the husband to settle a will contest should be considered his separate property.499

In a Texas case, where part of the recovery was considered separate and part marital, the court ruled when determining what portion of the net recovery was separate and what portion was marital, each estate should bear the some portion of the legal fees incurred.500

[3]—Prizes or Awards

A spouse might win a prize or an award...

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