§ 9.02 States without Express Statutes

• Jurisdiction: United States
• Publication year: 2021

§ 9.02 States without Express Statutes

Most states have no express statute regarding how a professional education received during marriage should be treated at divorce. The courts in these states must decide whether the professional degree and/or license is "property" divisible at the time of divorce. If it is property, a means of valuation must be found. If it is not deemed property, the courts must determine whether some other remedy is appropriate. In general, courts have construed the applicable general statutes to reach a fair result.

[1]—Whether a Professional Degree and/or License Is Property Owned at Divorce

[a]—The Early Consensus That a Degree or License Is Not Property

All state property division statutes limit the property divisible at divorce to "property" owned by one or both spouses at the time of divorce. Most courts have concluded that neither a professional degree²⁶ nor a professional

"An educational degree . . . is simply not encompassed by the broad views of the concept of 'property.' It does not have an exchange value or any objective transferable value on the open market. It is personal to the holder. It terminates on the death of the holder and is not inheritable. It cannot be assigned, sold, transferred, conveyed or pledged."²⁸

This transferability rationale for concluding that professional education is not property is one way to analyze this issue as long as the transferability standard is consistently applied by the state in question. For example, if other untransferable rights, such as unvested pension rights,²⁹ are considered property under applicable state law, it would be difficult to justify a conclusion that education is not property for this reason.³⁰

Another concern voiced regarding treating a degree as property is related to the transferability issue. Some courts have concluded that a professional degree and/or license is not property because it cannot be jointly owned.³¹ It is hard to comprehend how this characteristic should eliminate a degree from the class of divisible property, since other types of property, such as stock in a professional corporation, is considered marital property even though it cannot be titled in the name of both the husband and wife.³²

Another justification offered for not treating education as property stems from the observation that one spouse does not support the other through professional school with the expectation of compensation.³³ This observation is of questionable accuracy. While it may be true that a supporting spouse does not believe he or she has a guaranteed right to be repaid for support provided and services rendered, most supporting spouses hope to share the financial rewards of the educated spouse's increased earning capacity in the years after graduation. Courts must decide what is appropriate when these hopes ("expectations," if you will) of the non-educated spouse are not realized. A New Jersey court made these thoughtful statements regarding this issue:

"The termination of a marriage represents, if nothing else, the disappointment of expectations, financial and nonfinancial, which were hoped to be achieved by and during the continuation of the relationship. It does not, however, in our view, represent a commercial loss. Recompense for the disappointed expectations resulting from the failure of the marital entity to survive cannot, therefore, be made to the spouses on a strictly commercial basis which, after the fact, seeks to assign monetary values to the contributions consensually made by each of the spouses during marriage.
"If the plan fails by reason of the termination of the marriage, we do not regard the supporting spouse's consequent loss of expectation by itself as any more compensable or demanding of solicitude than the loss of expectations of any other spouse who, in the hope and anticipation of the endurance of the relationship . . . has invested a portion of his or her life, youth, energy and labor in a failed marriage."³⁴

Other persuasive reasons exist for not treating education as property. Many courts have commented that some procedures suggested for valuing education are quite imprecise.³⁵ For example, it has been argued that the value of education is the increased earning capacity of the educated spouse.³⁶ However, when a spouse has just graduated from professional school, it is quite difficult to estimate the spouse's future earnings without making a number of assumptions of questionable accuracy, such as the length of career, type of practice, geographic area of practice, and level of success attained.³⁷

In addition, if the value of education is only the increased earning capacity of the education spouse, the earning capacity of that spouse without the education must be computed.³⁸ This base earning capacity also cannot be computed without making a number of questionable assumptions.³⁹ For example, in a Pennsylvania case⁴⁰ the husband worked in 1971 as a medical technologist for a short time before he entered medical school. The dissenting judge argued that the medical technologist's wage rate, adjusted for the average annual raise received by white collar employees from 1971 until the year of divorce, could be used as the base earning capacity. However, how can it be known whether the husband would have remained a medical technologist? If the husband had the motivation and talent to complete his medical education, the assumption is unrealistic.⁴¹ Any calculation of the spouse's earnings in some other imagined career involves even greater speculation.⁴²

Courts generally assume that a professional earns a substantial amount of money because of the degree. It could be argued that professionals make a substantial amount of money due to their intelligence and motivation, rather than because of the degree. If this view is accepted, it would further complicate the valuation issue, since intelligence and motivation presumably are not divisible property.

Members of the education-is-valuable-property school are willing to make large leaps of faith in their argument regarding the value of education. For example, it has been pointed out that the average lifetime earnings expectancies in 1972 for a person with a high school education, and for a person with a college degree, were $450,000 and $725,000, respectively.⁴³ Some commentators have argued that these figures "prove" that a college education is worth, on the average, $275,000.⁴⁴ However, the figures prove nothing of the kind. Each educational level is a self-selected group with characteristics that will affect lifetime earning capacity in the contemporary United States. These characteristics include race, social class, intelligence, and motivation. To prove the value of the degree itself, these other variables would have to be eliminated.

This "valuation" approach makes the erroneous assumption that any college graduate may enter law or medical school; however, only those who have met the graduate school's entrance requirements have the option. This "right of entry" is a very valuable right and comes about as the result of prior human capital investments.⁴⁵

The earning capacity of a professional is the result of human capital investments made throughout the professional's life.⁴⁶ It is simply wrong to attribute the earning capacity solely to attendance in a professional school. One court has accepted this view and allocated the marital interest in a spouse's increased earning capacity by comparing the number of years the spouses were married against the age of the wage-earning spouse at the time of divorce.⁴⁷

Because of the uncertainties involved with valuing professional degrees according to increased earning capacity, some courts value the degree in terms of its cost. The "cost" is calculated based upon educational and living expenses incurred. This cost valuation approach also has been criticized as an imprecise measure of the worth of the degree.⁴⁸

Given the arbitrariness inherent in the increased earning capacity valuation method, it is not surprising that wildly different valuation estimates have been made. For example, in a Wisconsin case, evidence was submitted that the present value of a medical education for a young man was $266,000.⁴⁹ In another Wisconsin case only two years earlier, testimony was given that the medical degree was worth approximately $110,000.⁵⁰ In contrast, evidence was submitted in an Illinois case, two Ohio cases, a Utah case, and New York cases that an M.D. degree was worth $1,172,000,⁵¹ $1,500,000,⁵² $863,000,⁵³ $1,493,000,⁵⁴ $1,555,000,⁵⁵ $473,000,⁵⁶ $385,748,⁵⁷ $1,019,928,⁵⁸ $534,000,⁵⁹ and $3,150,000,⁶⁰ respectively.⁶¹ In a New York case, one spouse presented evidence that a law degree was worth $330,000, while the other argued it was worth $1,000,000.⁶² In other cases, a law license was found to be worth $1,547,000,⁶³ $302,000,⁶⁴ and $2,071,750,⁶⁵ respectively. A nurse's license has been valued at $734,389 in one case⁶⁶ and $32,000 in another.⁶⁷ In a New York case the hearing officer found that a certified financial analyst's certification was worth $3,353,000. The appellate court determined it was worth only $200,000.⁶⁸ In two other cases, a bachelor's degree in accounting was valued at $147,000,⁶⁹ and a teacher's license was valued at $333,000.⁷⁰ An M.B.A. degree has been valued at $42,596,⁷¹ $565,000,⁷² $704,571,⁷³ and $2,827,412,⁷⁴ respectively.

If an education is treated as a "marital asset" and divided at divorce, the division cannot be changed to adapt to any material changes in the spouses' circumstances.⁷⁵ In contrast, an alimony award allows for future flexibility, since alimony normally can be changed if the circumstances change.⁷⁶ Further, an alimony award cannot be avoided via bankruptcy.⁷⁷ For these reasons, many courts prefer an alimony remedy.⁷⁸

The minority of courts that accept the view that education is property reject the argument that the increased earning capacity is too speculative to value.⁷...