Property Division Under the Marital Partnership Model in Hawaii Divorces

• Jurisdiction: Hawaii,United States
• Citation: Vol. 21 No. 10
• Publication year: 2017

Property Division under the Marital Partnership Model in Hawaii Divorces

by Thomas E. Crowley III and Stephanie A. Rezents

There is no fixed rule for property division in Hawaii divorce actions other than it be "just and equitable" as set forth in Haw. Rev. Stat. § 580-47(a).¹To provide further guidance for the family court in dividing marital property, Hawaii case law has created a framework based on partnership principles.² These partnership principles have been customized by Hawaii case law to create the "Marital Partnership Model" for dividing property consistent with "a well-accepted ideal of marriage" for fairly dividing property without undue emphasis on who made or contributed the money for the marital estate.³ Under the Marital Partnership Model, "marriage is a partnership to which both parties bring their financial resources as well as their individual energies and efforts."⁴ To apply the Marital Partnership Model justly and equitably, the family court must divide the marital estate consistent with broadly stated equitable factors stated in Haw. Rev. Stat. § 580-47(a).

The application of these equitable factors to the Marital Partnership Model requires the family court to focus on the present and the future, not the past.⁵An important equitable factor justifying departure from an equal distribution of partnership property is "the condition in which each party will be left by the divorce,"⁶ such as where the proposed property division would result in a significant financial disparity between the spouses.⁷ In short, the Marital Partnership Model in Hawaii divorces is for the equitable division of the property of a marital partnership, as opposed to the division of property in a pure commercial partnership.

This article is intended to assist family law attorneys and their clients apply the Marital Partnership Model to property division in Hawaii divorces. It summarizes Hawaii's property division statute, the commencement and termination points of the marital estate for purposes of property division, the Marital Partnership Model, the five categories of Marital Partnership Property, the four sequential steps the family court must follow when addressing the division of marital property, and the equitable considerations justifying deviation from an equal distribution of marital property.

Property division in divorce is a huge topic, and space limitations prohibit a thorough discussion of many important property division issues. For these issues, the authors recommend the resources referenced in endnote 8.⁸

The property division statute

Haw. Rev. Stat. §§ 580-47(a)(3) and (4) provide that, upon granting a divorce, the family court may finally divide the real and personal property of the estate of the parties, as shall appear just and equitable:

Upon granting a divorce, . . . the court may make any further orders as shall appear just and equitable . . . (3) finally dividing and distributing the estate of the parties, real, personal, or mixed, whether community, joint, or separate; and (4) allocating, as between the parties, the responsibility for the payment of the debts of the parties whether community, joint, or separate, and the attorney's fees, costs, and expenses incurred by each party by reason of the divorce.

The phrase "estate of the parties" as it is used in Haw. Rev. Stat. § 580-47 means anything owned by one or both of the spouses that has present or prospective value.⁹ Haw. Rev. Stat. § 580-47(a) also provides six broadly-stated equitable factors that the family court is required to consider in dividing the marital estate:

In making these further orders, the court shall take into consideration: the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, the concealment of or failure to disclose income or an asset, or violation of a restraining order issued under section 580-10(a) or (b), if any, by either party, and all other circumstances of the case.

Because Haw. Rev. Stat. § 580-47 directs the court to do what is "just and equitable," each case must be decided upon its own facts and circumstances.¹⁰ To attain a certain degree of uniformity, clarity or predictability of family court decisions, while preserving the wide discretion mandated by Haw. Rev. Stat. § 580-47, the Hawaii Supreme Court adopted partnership principles to guide and limit property division.¹¹

The commencement and termination points of the marital estate for purposes of property division

The marital estate can include property owned before the marriage if the parties had entered into a "premarital economic partnership."¹² In order for a premarital economic partnership to exist, the parties have to have: (1) cohabitated; (2) devoted their energies and financial resources for one another; (3) intended that there be a premarital economic partnership; and (4) subsequently marry. In determining whether the parties intended to form a premarital economic partnership, relevant considerations include joint acts of a financial nature, the duration of the cohabitation, whether finances were commingled, economic and noneconomic contributions to the household for the couples' mutual benefit, and how the couple treated finances before and after the mar-riage.¹³ Contributions made by either spouse after the couple entered into a premarital economic partnership are included within the "all other circumstances of the case" equitable factor which the family court is required to consider by Haw. Rev. Stat. § 580-47(a).¹⁴ The termination point of the marriage for purposes of property division is the conclusion of the evidentiary part of the divorce trial, as opposed to the date of the parties' final separation in contemplation of divorce.¹⁵

The Marital Partnership Model

Under general partnership law, "each partner is entitled to be repaid his contributions to the partnership property, whether made by way of capital or advances."¹⁶ Absent a partnership agreement to the contrary, "partners share equally in the profits of their partnership, even though they may have contributed unequally to capital or services."¹⁷Haw. Rev. Stat. § 425-118(a), regarding the rights and duties of partners, provides:

The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:
(a) Each partner shall be repaid the partner's contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied; and must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according to the partner's share in the profits.

Under partnership principles, if the spouses have not agreed otherwise, marital property is equally divided "where the only facts proved are the marriage and the existence of jointly owned property."¹⁸

The Hawaii Marital Partnership Model customizes general partnership law to property division in divorce by: (1) recognizing three general classifications of marital property; (2) establishing five categories for allocating "Marital Partnership Property;" (3) setting the sequence in which the family court is to address the division of property; and (4) in the event of inequity, mandating the consideration of the equitable factors in Haw. Rev. Stat. § 580-47(a).

The Marital Partnership Model recognizes three general classifications of marital property: premarital separate property, marital separate property, and marital partnership property.¹⁹ "Premarital Separate Property" is property owned by each spouse immediately prior to their marriage or cohabitation that was concluded by their marriage. Upon marriage, this property became either Marital Separate Property or Marital Partnership Property.

Marital Separate Property ("MSP") is a narrow category of separate property owned by one or both of the spouses at the time of the divorce that has been excluded from the marital partnership and thus not subject to division. In other words, Marital Separate Property remains with the owner of that property.²⁰While MSP cannot be used by the family court to offset the award of Marital Partnership Property to the other spouse, it can be used by the family court to alter the ultimate distribution of Marital Partnership Property based on the respective separate conditions of the spouses.²¹

There are three methods of segregating property as Marital Separate Property: (1) a premarital agreement pursuant to Haw. Rev. Stat. Chapter 572D; (2) a valid "marital agreement" pursuant to Haw. Rev. Stat. § 572-22; and (3) gifts and inheritances acquired during the marriage that were "expressly classified" as separate property, maintained by itself or sources other than one or both of the spouses; and "funded by sources other than marital partnership income or property."²² If a gift or inheritance classified as separate property was maintained by marital assets, such as paying inheritance taxes from Marital Partnership Property, the inheritance cannot be classified as Marital Separate Property. The remaining gift or inheritance becomes disqualified from being characterized as MSP and becomes subject to division as Marital Partnership Property.²³

The five categories of Marital Partnership Property

Marital Partnership Property ("MPP") is all property that is not Marital Separate Property. The assets and debts of most marital estates fall into the MPP classification of marital property. With respect to MPP, the Marital Partnership Model established five categories of net market values ("NMVs") that the family court may use as guidance in divorce cases:²⁴

Category 1. The net market value (NMV), plus or minus, of all property separately owned by one spouse on the date of marriage...