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As we have stressed time and time again on our blog, property division is one of the most critical phases of the divorce process. Spouses often expend an enormous amount of energy and effort during the property division phase of divorce. Spouses do this so that they can put themselves in the best possible financial position post-divorce. Depending on the details of a given case, property division can also be a highly complex phase of divorce. Think of a scenario in which a high-earning or financially successful spouse accumulates substantial wealth both before and during the marriage. In scenarios such as these, the property division may be complicated by many variables: CPAs and other financial professionals may need to be hired as consultants; there may be arguments as to which assets are marital and which are separate property; and so forth.
In the case of Levengood v. Inwood (2021), a marriage which lasted just two years was complicated by the fact that the husband allegedly “commingled” his sizable 401(k) funds with marital funds. Let’s examine this case in detail so we can see some of the complexities which arise from “mixed” or “partial” marital assets.
Factual Outline of the Case
As mentioned, the marriage in this case last just two years. The husband was a successful businessman prior to the marriage, and his financial success continued throughout the duration of the marriage as well. The wife was a social worker. After the couple married, the husband rolled over his preexisting 401(k) plan into an account which held marital funds. There is no question that, prior to rolling the 401(k) funds over to the joint account, the 401(k) funds were initially the sole separate property of the husband. Because the 401(k) funds were rolled over into a joint account, and were suddenly “commingled” with marital funds, the wife argued that the 401(k) funds became at least partially marital. In a sense, she argued that the 401(k) funds were at least partially “converted” to marital funds because of the fact that the husband contributed them to the joint account in this manner. When the case was litigated, the husband argued that the 401(k) funds should all remain his separate property, even though he had in fact deposited the funds into a joint account.
Ruling & Discussion
Ultimately, the husband was not successful in his argument that the entire 401(k) plan should remain his sole separate property. Now, if the husband had not contributed those 401(k) funds to a joint account, but had instead deposited them into a separate account, the husband’s fate may have been different. However, the court determined that the husband’s decision to “commingle” the 401(k) funds in this manner had the effect of converting at least some of the 401(k) funds into marital property. This meant that the wife was entitled to a share of the 401(k) funds in divorce. The law is familiar with other scenarios in which separate property can be converted into marital property during divorce. For instance, a separate piece of real estate can be partially “converted” to marital property if it be improved with marital funds during the marriage, or even if it simply appreciates in value due to natural market forces.
Contact the Murphy Law Firm for More Resources
If you want more resources on this topic, or another related matter, connect with one of the family law attorneys at the Murphy Law Firm today by calling 240-219-5243.
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