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Marital Home Transmuted Into Marital Property for Divorce Purposes
© 2005 National Legal Research Group, Inc.
ALASKA: Miller v. Miller, 105 P.3d 1136 (Alaska 2005).
The marital home transmuted into marital property because the husband intended to give his separate interest to the marriage. Donative intent was shown by use of marital funds and the wife's efforts to maintain the property, and by the lack of any effort by the husband to preserve his separate interest. The husband also made a gift to the marital estate of a substantial gift from his mother. A presumption of gift arose when the husband placed the gifted funds into a jointly titled investment account, and the presumption was not rebutted on the facts.
The husband appealed a determination by the trial court that several properties acquired by him should be classified as marital property and subject to equitable distribution. The court divided the marital property equally and ordered the husband to make a cash payment to the wife of $123, 269.
During the marriage, the parties lived in a home that had been given by the husband's mother to him one week prior to their wedding. They lived in the home until the date of separation. The trial court held that the marital home, though once the husband's separate property, was transmuted into marital property over the 13 years the parties lived together. The husband argued that the lower court had erred. While recognizing that separate property can be transmuted into marital property, he asserted that in the present case it remained his separate property because the parties always treated it as such. Alternatively, he argued that if any portion of the home's value was marital property, it would be only that amount by which the home appreciated in value during the marriage.
In rejecting the husband's first argument, the court noted that separate property becomes marital property if the parties demonstrate an intent to treat the property as marital property. In making a determination as to whether this has been established, a court will consider factors such as (1) use of the property as the parties' personal residence; (2) both parties' participation in ongoing maintenance and management; (3) placing title in joint ownership; and (4) using the credit of the nontitled party to improve the property. Here, the lower court had concluded that the residence had been transmuted into marital property based upon the evidence which it heard showing that taxes, insurance, and maintenance expenses were paid from marital property, that the wife had cleaned and maintained the property throughout the marriage, and that the husband had actually made no effort to maintain the separate character of the property during this time. The record therefore supported the findings and conclusions of the lower court that the property had been transmuted from separate property into martial property.
As to the husband's second argument that the wife was entitled to receive only a share of the increased value of the property rather than its total value, the Alaska Supreme Court held that this argument ignored the differences between the theories of transmutation and active appreciation. While separate property can become marital property under either theory, transmutation converts an asset entirely from separate property to marital property, while active appreciation converts to marital property only the increase in an asset's value due to a contribution of marital funds or efforts. The court noted that these theories were mutually exclusive, and that it had been recognized under prior authority that if separate property is transmuted, the trial court must allocate the entire equity in the property rather than just the appreciation in value. As the parties had stipulated that the property was worth $144,000 and that the house was unencumbered through the date of separation in 2001, the lower court correctly determined that the full equity value was marital property.
In addition to the marital residence, the husband argued that a gift made to him during the marriage by his mother of $230,000 in funds which he used to open an investment account in his own name was also separate property. The account listed his wife and children as survivor beneficiaries. One year later, the account was converted to a joint account in his name and that of his wife, with each party being named the survivor beneficiary of the other. At the trial, he testified that he transferred the funds to the joint account so that if he died before his wife the funds would transfer to her without going through probate, but that he was fully in control of the account because it was his inheritance. The Alaska Supreme Court acknowledged that inherited property is separate, even if received during the marriage, though it can be transmuted into marital property when that is the intent of the owner. It noted further that there is a strong presumption that placing separate property into a joint account demonstrates an intent to treat the property as marital. Thus, absent evidence to the contrary, the husband's decision to move the funds into a joint account was viewed as an intent to treat the property as marital. The fact that the wife made no effort to access the account did not affect the character of the funds as marital, contrary to what was argued by the husband, as he generally controlled the parties' finances and precluded the wife from making any decisions with regard thereto. The husband's other argument, that the funds were placed in a joint account, not with an intent to establish marital property, but solely for probate purposes, was also without merit. The supreme court found that the decision of the trial court, that the investment account transmuted to marital property, was not clearly erroneous and would be affirmed.
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