Do husband’s transfers of his separate property into jointly-titled property with his wife create marital property subject to equitable distribution by transmutation in Virginia?
Not in the case of William E. Jones v. Donna M. Jones, Record No. 2428 (2009), where, in an unpublished opinion, the Court of Appeals of Virginia reversed the Circuit Court’s holding that the assets were gifts to the wife, ruling that the wife had not met her burden of proving donative intent by clear and convincing evidence.
The first step in equitable distribution in a Virginia divorce case is classifying all property of the husband and wife as separate, marital, or hybrid – part marital and part separate. Under Virginia Code Section 20-107.3(A)(3)(f), a divorce court judge can find marital property by the process of transmutation: “When separate property is retitled in the joint names of the parties, the retitled property shall be deemed transmuted to marital property. However, to the extent the property is retraceable by a preponderance of the evidence and was not a gift, the retitled property shall retain its original classification.”
The husband in Jones alleged that the divorce court judge erred by finding that a jointly titled investment account and a parcel of Virginia real property titled as tenants by the entireties were gifts to his wife and, consequently, marital property subject to equitable division. Furthermore, the husband contended the court incorrectly concluded that an automobile titled in their joint names was marital property.
The husband and wife had a marriage of short duration with no children. The husband was considerably wealthier than wife and developed severe health problems. He testified during the equitable distribution portion of the divorce case that he put assets into the parties’ joint names for estate planning or insurance purposes.
In presenting his case, the husband argued he never intended to give either the bank account or the real property to his wife. He asserted he only wanted his wife to take care of his health issues by giving her access to the bank account, and he intended for his wife to sell the real property and distribute the funds to his children if he died. Furthermore, he testified that he bought the automobile so his wife could commute to her job in Washington D.C., but he did not give it to her because she failed to meet his condition of giving her vehicle to his son.
According to the Virginia Circuit Court judge, the wife established that the husband’s joint titling of the property signified valid inter vivos gifts to the wife. By assuring her, “This is your property” and “[this] would be ours,” the husband established a pattern of giving, which the lower court stated “was for the purpose of persuading her that she was his wife and he was going to share with her.” However, the Virginia Court of Appeals reversed this holding after reviewing the record of evidence on appeal.
As the Court of Appeals noted, the standard of review for reversal is high, and because a classification of property involves a determination of fact, the trial court’s determination could only be reversed if it was “plainly wrong or without evidence to support it”, citing the unpublished case of Ranney v. Ranney, 45 Va. App. 17, 31-32, 608 S.E.2d 285, 492 (2005). Here, the Court recognized that a gift requires a “voluntary transfer of property to another without compensation.” Black’s Law Dictionary 709 (8th ed. 2004). Moreover, the Virginia Court of Appeals affirmed that retitling property, in and of itself, does not create the presumption of a gift. Utsch v. Utsch, 266 Va. 124, 128, 581 S.E.2d 507, 50 (2003). Although wife’s testimony was consistent with joint ownership, that she had access and use of the assets, her testimony did not establish donative intent. Therefore, the party trying to establish a gift must prove by clear and convincing evidence the following elements: 1) the intention on the part of the donor to make the gift; 2) delivery or transfer of the gift; and 3) acceptance of the gift by the donee. Robinson v. Robinson, 46 Va. App. 652, 665-66, 621 S.E.2d 147, 153 (2005). In Jones, the Court of Appeals determined that the wife’s testimony only supported a finding of jointly held property, which does not lead to the finding of a gift. Therefore, the Court revered the trial court’s findings and remanded the case to determine an equitable distribution of the assets based on the record.
You should consult with a Virginia divorce lawyer to discuss whether your property might be considered separate property, marital property, or hybrid property in equitable distribution.