Real estate and partnership trust property not considered marital property under circumstances of this divorce: GRIPSHOVER V. GRIPSHOVER (SC 2/21/2008)

GRIPSHOVER V. CRIPSHOVER
FAMILY LAW:  Nonmarital Property, Estate Planning, Child Support, Section 179 Expense, Imputed Income
2005-SC-000729-DG.pdf
PUBLISHED: AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
OPINION BY ABRAMSON; SCHRODER NOT SITTING
DATE RENDERED: 3/19/2008

Husband and his brother owned a farming operation, realty totaling over 600 acres, and a promissory note for more than a million dollars. They formed two limited partnerships: 1) a real estate partnership with their wives that would hold and manage the realty, and 2) a partnership to manage the farming operation. The brothers also assigned their partnership interests to two trusts. The wife signed documents allowing said transfers. The Supreme Court granted discretionary review to consider the validity of the partnership and trust into which the parties transferred a large portion of their estate less than a year prior to the filing of the petition for divorce, as well as to review the child support and maintenance awards.

Real estate partnership and trust: There was no evidence that either party was contemplating divorce at the time the estate plan was executed or that the husband’s intent was to impair the wife’s marital rights. Therefore, the wife had not been defrauded, as she knowingly and voluntarily consented to the estate plan. The COA erred in holding that the wife retained an interest in the realty and that it was subject to division as marital property. The wife’s argument that the estate plan should be set aside due to the husband retaining control over the realty and not truly giving it to the trust is without merit. SC noted that the wife did not join the necessary parties to challenge the validity of the partnership and trust. Moreover, SC held there was nothing wrong with the brothers retaining control of the realty for the purpose of use in the farming operation. The realty was not transferred to the trust, but instead the partner’s interest in the partnership. Thus, the realty was validly removed from the marital estate and was not subject to division.

Husband’s nonmarital interest in the promissory note: Wife argues that husband’s entire half of the note is marital, since the other siblings quit-claimed their interests to the three remaining siblings (one being the husband) in 1987 (parties married in 1988) for no consideration. Wife argued that because the siblings gave up their interests for no consideration, the property should be regarded as having no equity at that point, and that all equity in the property was acquired after the marriage. The court rejected this argument, especially since in 1989 a small portion of the land was sold for more than the outstanding indebtedness which adequately established that the property increased in value as a result of economic factors alone.

Child support and maintenance: The parties’ incomes were wrongly determined. TC erred in allowing the husband to calculate his income for child support purposes using 26 U.S.C. sec. 179 expense deductions. Section 179 provides an alternative to standard, straight line depreciation, which KRS 403.212(2)(c) mandates as the only allowable method. TC also erred in imputing the wife with $360 per week of income, a level of income well above what she achieved when she was younger and in much better health. TC did not adequately consider all of the statutory factors in KRS 403.212(2)(d). Therefore, SC held that both child support and maintenance must be reconsidered.

Digested by Sarah Jost Nielsen, Diana L. Skaggs + Associates

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