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Marital Funds Used to Pay Pre-Marital Debts During the Marriage
© 2005 National Legal Research Group, Inc.
INDIANA: Gard v. Gard, 825 N.E.2d 907 (Ind. Ct. App. 2005).
The trial court erred by including in the divisible estate funds used to pay off the husband's premarital debts. On remand, however, the trial court could consider that payment as a division factor in the wife's favor.
At the time of divorce, the trial court determined that the husband owned property with a net worth of $349,002.57, and that the wife owned property with a net worth of $35,690.68. The parties' total net worth was therefore $384,693.25, all of which was subject to division under Indiana's all-property division statute.
The trial court further found that at the time of marriage the husband's net worth was negative $95,613.14. Adding this negative premarital net worth to the positive net worth of the parties at the time of divorce, the trial court held that the total divisible estate was $289,080.11. It then awarded the wife 65% of this amount, finding that Indiana's statutory equal division presumption was rebutted by evidence that the wife suffered from physical disabilities and was not reasonably able to work, while the husband's earning capacity was substantial.
The wife moved to reconsider, arguing that the trial court should have subtracted the husband's negative premarital net worth from the parties' total net worth at the time of divorce, so that the proper total net value of the divisible estate was $480,306.39. The effect of this proposed method would be to include in the divisible estate the entire increase in value of the parties' net worth during the marriage, from a negative $95,613.14 to $384,693.25. The trial court agreed and granted the wife's motion to reconsider. In light of the greater size of the divisible estate, however, the court reduced the wife's share from 65% to 60%.
The husband appealed, arguing that the trial court had erred by granting the wife's motion to reconsider. The Indiana Court of Appeals agreed. The law of equitable distribution allows the court to divide only assets owned by the parties at the time of divorce. At the time of divorce, the parties owned property worth exactly $384,693.25. Money paid out of the divisible estate before the divorce to pay off the debts (marital or premarital) of one party does not exist at the time of divorce. Funds acquired during the marriage were admittedly used to pay off $95,613.14 of the husband's premarital debts, but the funds so used were no longer owned by the parties, and they were not subject to division. "Husband's premarital liabilities and the marital assets used to satisfy those liabilities did not exist when Wife petitioned for dissolution." 825 N.E.2d at 911. The trial court therefore had erred by holding that the divisible estate was worth $480,306.39.
By the same reasoning, however, the trial court's original decision was also wrong. That decision valued the divisible estate as if the husband had a positive net value of $95,613.14 on the date of divorce. The husband did not have such a positive net value. Even if he did, the positive value would still have been divisible, for the concept of separate property is not recognized in Indiana. As the trial court recognized, the original judgment intended to apply the same method for computing the marital estate as applied in the revised judgment, and simply made a mathematical error.
The remaining task was accordingly to divide the $384,693.25 in divisible property owned by the parties at the time of divorce. The trial court had awarded the wife 65% of an estate worth $289,080.11, and 60% of an estate worth $480,306.39, but the court had not yet determined the wife's equitable share of an estate worth $384,693.25. Moreover, while the trial court could not treat the funds used to pay off the husband's premarital debts as if they still existed, "the trial court is not prohibited from considering Husband's premarital debts and their satisfaction with marital assets as factors relating to an appropriate division of the marital assets existing at the time of final separation." Id. at 911. The case was therefore remanded to the trial court for further proceedings to determine the wife's equitable share of the divisible estate.
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