In a case that will significantly alter the way Virginia divorce cases are negotiated and litigated, the Virginia Supreme Court unanimously ruled in my client’s favor, and overturned a line of Court of Appeals cases going back two decades.
In David v. David, our office represented a wife who was going through a divorce. At the time she married her husband, he owned a brokerage account. During the marriage, the husband, who had significant training in trading stocks, spent many hours trading stocks in the brokerage account. By the time our client separated from the husband, the value of the account had grown by several hundred thousand dollars.
In the trial court (what the circuit court is called in appeals) the judge found that the increase in the value of the brokerage account was “marital” property, which means that the wife could receive a share.
The husband appealed the case to the Virginia Court of Appeals. This is the court where divorce appeals initially go. The Court of Appeals reversed the trial court (that is, struck down what the trial court had done). The Court of Appeals said that Virginia law required the wife to prove at trial that the entire increase in value was due solely to her husband’s efforts and not because of any other reasons, such as the general economy, market forces, inflation etc. The legal name for what the wife was required to do is a “burden of proof”. The Court of Appeals ruled that the husband got to keep 100% of all of the increases in value that were created during the marriage.
The Old Law
The Court of Appeals was simply ruling as it had for the past 15 years. As a result, for the past 15 years, whenever one spouse owned an asset before the marriage (such as a house, or a business or a brokerage account), and that asset increased in value during the marriage, it was almost impossible for the other spouse to meet what the Court of Appeals said was her “burden of proof”. In other words, the spouse who originally owned the asset got to keep 100% of the increase in value.
A very common example would be that a spouse would own a small business prior to marriage. During the marriage, that spouse worked every day in the business, and the value of the business increased dramatically. Because the other spouse couldn’t prove that only the husband’s efforts and nothing else – competitors, the secretary, other employees, etc. – had caused the increase, the entire business would be awarded to the spouse who owned the business.
The New Law
We appealed the Court of Appeals decision to the Virginia Supreme Court. And we convinced the Supreme Court to unanimously rule that the way the “burden of proof” had been applied for the past 15 years was dead wrong.
The Supreme Court agreed with us that the law should be that increases in value during the marriage should be presumed to be part of the marital estate. That is, divorce courts should automatically put increases in value during the marriage into the marital estate unless the spouse who owns the asset can prove that the increase in value during the marriage was not in any way connected to his efforts.
Why this is Important
When one spouse works during the marriage in a small business or spends years during the marriage trading stocks in a brokerage account, his or her marital efforts are being expended on increasing the asset’s value. Virginia law is intended to encourage as much property to be included in the marital estate as possible. The old law did the exact opposite. It made it almost certain that some of the biggest assets in a divorce case would not be included in the marital estate. Our change to the law now makes it very likely that large assets like businesses and stock accounts will now be included in the marital estate, and available to be divided between the spouses.
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