Virginia Divorce – Equitable Distribution of Pre-Marital Property after the David Case

In Virginia, property that is owned pre-marriage is known as “separate property”. Separate property may consist of:

• tangible assets (e.g. automobiles, antiques, furniture),
• liquid assets (e.g. bank accounts, mutual funds, stocks),
• retirement assets (e.g., 401(k)s, TSPs, IRAs, pensions),
• real estate, and
• business interests

Under §20-107.3 of the Virginia Code, the spouse who came into the marriage with the separate property is permitted to keep that property as his or her own individual property. That means that the separate property will not become part of the marital estate upon divorce and will not, therefore, be eligible for division and distribution by the court.

Contrary to many people’s belief, in Virginia, even the increase in value of a spouse’s separate property is also considered that spouse’s separate property. There are, however, exceptions. The increase in value of separate property is considered marital property (divisible and distributable by the court):

(1) to the extent that either one or both of the parties, during the course of the marriage, exerted significant efforts with regard to that separate property (e.g. blood, sweat and tears; time spent in the management of that separate property)

AND

(2) to the extent that there is a substantial increase in the value of the separate property.

In a court of law, there are different burdens of proof assigned to the parties. That means that the spouse who originally owned the separate property, as well as the other spouse, have a particular set of facts to prove, with evidence, before a court will rule in that spouse’s favor. (Think of “burden of proof” as “burden to prove”). In Virginia, the burden of proof is on the non-owning spouse to prove that the marital efforts (the efforts of one or both of them) were significant and that the property increased the value, during the marriage, by a substantial amount. Until the recent Virginia Supreme Court case of David v. David, (Va., 2014)http://caselaw.findlaw.com/va-supreme-court/1658789.html, the non owning spouse was also looked to for proof that the cause of the increase in the value of that asset was, in fact, directly related to the efforts of one or both of the spouses during the marriage[1].   This is no longer true after the David case. David clarified this area of the law (even though, on its face the statute seems to have always said this!) and the burden of proof now squarely sits on the shoulders of the spouse with the separate property interest to show that his or her efforts were not, in fact, the direct cause of the increase in value of the property.

For example: Husband owned a business prior to the marriage. During the marriage he worked like a dog (significant efforts!) on the business. When the business was valued at the time of the separation and divorce, it was clear that it had increased substantially in value during the course of the marriage. Under the old way the Virginia courts viewed the law, the wife would have had the burden to show that it was the Husband’s efforts – directly – that increased the value of the property.  Since David, however, the burden has shifted. It is now the separate property owner (the Husband, in this example) that has to prove that his efforts did not, in fact, increase the value of the asset.  All the Wife needs do is show (her burden of proof) that (1) the Husband exerted significant efforts; and (b) that the business went up in value.

Whenever there is an issue of hybrid property in a divorce case, it is best to seek the advice of a professional: a lawyer-mediator and/or an experienced divorce attorney.

[1] In Virginia, “during the marriage” means from the date of marriage to the date of separation (either adjudicated by a court or agreed to by the parties). Many other jurisdictions define “during the marriage” to also include the period of time between the parties’ separation and divorce. In mediation, clients are free to define “during the marriage” either way and, sometimes, define “during the marriage” to include that period of time between the date of marriage and the date of the first mediation session.