2004 Summer, 58. DIVISION OF THE PRE-MARITAL TRUST OR INHERITANCE.

AuthorBy Attorneys Charles G. Douglas, III and Carolyn S. Garvey

New Hampshire Bar Journal

2004.

2004 Summer, 58.

DIVISION OF THE PRE-MARITAL TRUST OR INHERITANCE

NH Bar JournalSummer 2004, Volume 45, Number 2DIVISION OF THE PRE-MARITAL TRUST OR INHERITANCEBy Attorneys Charles G. Douglas, III and Carolyn S. GarveyAn outstanding yet difficult issue to be confronted under New Hampshire divorce law is how to apportion a multi-million dollar inheritance, trust or business that pre-exists a long-term marriage. While everything must be "considered" for division in a long-term marriage under RSA 458:16-a, there is also clear statutory recognition that in dividing property, significant pre-marital assets may be a factor in an unequal division.(fn1) But should the split be 80/20, 70/30 or 50/50 in such circumstances?

I. NEW HAMPSHIRE LAW

In fashioning property settlements in divorce, states are divided into three main categories: "community property" states,(fn2) "marital property" States(fn3) and "all-property states."(fn4) New Hampshire is an "all-property" state that gives the court the authority to divide all property of the parties (however or whenever acquired) in an equitable manner. A court is required to view the parties' property as a whole and then make an equitable distribution.(fn5) Whether property is individually or jointly owned, it is still considered a marital asset.(fn6)

In 1992 the legislature enacted RSA 458:16-a, which creates a rebuttable presumption that an equal division of the marital estate is equitable. The statute recognizes that an equal division is not always appropriate or equitable and enumerates 15 factors for a court to consider in determining the issue. These considerations include, among others: the value of any property acquired prior to the marriage and property acquired in exchange for property acquired prior to the marriage; the value of any property acquired by gift or devise; any significant disparity between the parties' contributions to the marriage; the actions of either party during the marriage which contributed to the growth in value of property owned by either or both; the fault of either party, if that fault caused the breakdown of the marriage, and caused substantial mental pain and suffering; and any other factors that the court deems relevant.(fn7) Traditionally the factors enumerated in RSA 458:16-a were the same factors relied upon by New Hampshire courts to justify unequal property allocations before the enactment of the statute in 1992. It remains well-settled law that courts in New Hampshire have broad discretion in dividing marital property.(fn8) Courts are not required to divide properly equally, but rather estates must be apportioned according to the equities of the circumstances.(fn9) Furthermore, if the court determines that an equal division of property is inappropriate, the court may find that equitable distribution of a marital asset means awarding the asset, in whole, to one party with or without an offsetting credit.(fn10)

New Hampshire cases decided under RSA 458:16-a (and before its enactment), are replete with unequal awards of marital property, based upon factors enumerated in the statute and upon considerations which are not specifically mentioned, but fall under the heading, "any other factor that the court deems relevant."(fn11) For instance, in Grandmaison v. Grandmaison,(fn12) the husband was awarded approximately 75% of marital property, including his share in a hotel business acquired prior to the marriage when the wife did not contribute either assets or substantial labor to its development. In Henderson v. Henderson,(fn13) the wife received approximately 88% of marital property because the property had been purchased from her mother at a price far below market value. Hodgins v. Hodgins(fn14) held that exclusive premarital possession of an asset by one party that continues after marriage, the recent acquisition of an asset by one party through a family relationship, the assurance of each party's future security, and the fault of either party may result in an unequal property settlement.

Likewise, in McAlpin v. McAlpin,(fn15) all proceeds from the sale of a jointly-owned summer camp went to the wife, who had paid the majority of the purchase price with her family inheritance. But a joint stock account was awarded to the husband where it contained funds "largely attributable to gifts from his family."(fn16) And in Jones v. Jones,(fn17) the wife received a greater portion of the parties' real estate holdings, including the marital home and two mobile homes, considering that one of the mobile homes and the land upon which both were situated had been owned by the wife prior to the marriage.

Finally, only pension benefits attributable to employment during the marriage are subject to distribution, but those accruing prior to the marriage are not.(fn18) In sum, New Hampshire recognizes that certain assets acquired prior to a marriage, while considered part of the marital estate, are not equally divisible at divorce. In a short-term marriage, the assumption is that the parties will be put back in the same position they were in prior to the marriage. However, in looking at a long-term marriage examples of how other states handle substantial premarital assets may be instructive for New Hampshire.

II. OTHER "ALL-PROPERTY" STATES HAVE AWARDED A BUSINESS OR PROPERTY OWNED PRIOR TO THE MARRIAGE, OR RECEIVED THROUGH GIFT OR INHERITANCE, EXCLUSIVELY TO ONE PARTY.

Other "all-property" states have had more opportunities than our state to interpret their statutes in cases where one party received substantial property through inheritance or gifts, or brought substantial assets, such as a business, into the marriage. While these states include "all property" of the parties in the marital estate and require an equitable distribution of assets, they acknowledge circumstances where an unequal distribution of property is equitable and just. Some "all-property" states begin with the presumption that all property owned by either party, including inherited or gifted property, is marital property and then outline factors that can rebut the presumption.(fn19) Other "all-property" states begin with the premise that inherited or gifted property, or property acquired prior to the marriage is not included in the marital estate unless it would be inequitable not to do so.(fn20)

A. Seven other states, like New Hampshire, begin with the presumption that all property is marital property and list circumstances that justify an unequal property division

1. Massachusetts

In Massachusetts, a court may assign to either the husband or the wife all or any part of the estate of the other. In fixing the nature and value of the property to be assigned, the court may consider, among other things, the contribution of the parties in the acquisition, preservation or appreciation in value of their respective estates.(fn21) In making an equitable distribution of marital property, the courts consider that "the parties' respective contributions to the marital partnership remain the touchstone of an equitable division of the marital estate."(fn22) "Property division . . . is based on the joint contribution of the spouses to the marital enterprise." (fn23)

The Supreme Judicial Court, in Williams v. Massa,(fn24) reasoned that a property settlement awarding a husband 75% of the marital assets was equitable because: (1) a large portion of the inherited and gifted assets predated the marriage; (2) the husband managed those assets and made all investment decisions; and (3) the income from the trust assets was spent by the family and used to calculate support. The court further stated that since there were other joint assets, there are no circumstances that would mandate an assignment to the wife of the husband's separate property.

Similarly, in Ross...

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