Marital Assets Feed

What is Commingling of an Inheritance in a RI Divorce?

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Atty Chris Pearsall

Authored By:  Christopher Pearsall, RI Divorce Attorney
a.k.a.  " The Rhode Island Divorce Coach ℠ "

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Commingling, at least when we are talking about Rhode Island divorce, is the process of changing the character of a non-marital or pre-marital asset into a marital asset.

Why is that important?  Because generally, non-marital assets and premarital assets that have not been either

1) Commingled, or

2) Transmuted 

are not part of the marital estate and belong to the person who first owned them or received them.

To avoid confusion let's deal strictly with commingling in this article.

Generally, Inheritances or Gifts to one spouse of the marriage from a third-person are not part of the marital estate and are not subject to the court's power of equitable distribution.  They simply belong to the person who initially received them.

However, there are two exceptions, namely, "commingling" and "transmutation."

We'll only deal with commingling for the time being.

 Each case is dependent upon the facts and circumstances of that case.    However, there are a few fundamental ways that visual people can understand this concept.  I'll show one way very quickly in this brief article.

Glass
Your Account

 

 

You have a bank account solely in your name.  Imagine this glass is the bank account.

Suddenly someone dies and you inherit $50,000 and put it in that account.  

 

 

Money in Account
$50,000 in Your Account

 

 

 

 

Your $50,000 is the water that is now in your account which is the glass.

 

 

 

Since the account is solely in your name and the money was only inherited by you, it is yours and it is protected as long as it stays this way.  

There may be numerous assets that were obtained during your marriage from your earnings or your spouses earnings but the $50,000 is a non-marital asset and has been protected by keeping it separate from assets or debts related to your marriage.  

In short, it is a non-marital asset and it is not subject to distribution in a Rhode Island family court divorce or separation proceeding.

Now, let's see what happens with an example of commingling.

Joint Bank Account
Joint Account with $54,500

 

This time instead of having your own account, you and your spouse already had a Joint Account that has $4,500 in it that came from your income, yours and/or your spouse's income.

So the joint account had $4,500 in it and you deposit the $50,00 that you inherited into it. 

Look closely at the Joint Account on the left that now has $54,000 in it. 

If you were to get divorced right now and this account had to be divided, you should not expect to get that $50,000 back as an inheritance.  

 

Why?  Because you have commingled it with the other money.  Look closely!  If the water is the money, then the water molecules are the dollars in the account.  Can you tell which water molecules were in the glass before and which ones are the new ones?  No, you can't and neither could a judge.  They have been so mixed together they they must be considered as just one account.  

Rhode Island law doesn't allow you to simply cut the $50,000 back out again.  Now it is in a glass that is in both names and it is impossibly mixed together so it can't be unmixed, so Rhode Island Law says the entire amount of money belongs to both you and your spouse and the judge is likely to split all the monies in the account on a 50/50 basis. 

Commingling is the same concept as blending or mixing.  If you blend or mix something enough with your spouse or your family life that a judge considers it marital, then the judge can determine that you have commingled it and instead of it being your single property anymore it can become marital property and divided by the family court.

The moral of the story.  

Generally speaking, if you want something to remain separate then keep it separate, entirely.  If there had even been $1.00 in the Joint account and you put the $50,000 into the Joint account even for 10 minutes, you would find out that you put it in there for 10 minutes too long and it would have been too late.  You would have commingled the $50,000.


In a RI Divorce Are Gifts Between Spouses Marital Property?

QUESTION: 

Are gifts that were purchased and given between spouses during our marriage considered marital assets and subject to equitable division in RI divorce? If yes, can you site the reference where it is stated in RI law.

 

ANSWER: 

Generally speaking, the answer is "Yes."  For the direct law you should look to R.I. General Laws § 15-5-16.1(b).  Read the very last sentence of paragraph (b).

Keep in mind that you are not looking for what the law says.... but rather, you are looking for what that last sentence doesn't say. Specifically pay attention to the fact that the law talks about gifts from third-parties as not being marital assets.  Yet the law did not say that about gifts between spouses.  Therefore, gifts between spouses are marital assets.

However, please note that while that is the "general rule", a good lawyer always checks to see if an exception may apply.

Exceptions to the general rule may occur when either the Rhode Island Doctrine of Commingling or the Doctrine of Transmutation apply.

In other words, the answer may depend upon the circumstances that follow and how the gift was treated by the parties after it was first given. Those circumstances may change the general "Yes" to a "No."

 

My Very Best to You in Addressing Your Family Law Issues,

Attorney Chris A. Pearsall aka "The Rhode Island Divorce Coach."®

 

Serving Rhode Island Families exclusively in the Rhode Island Family Courts throughout our State for more than 12 years.

Call (401) 632-6976 for your low-cost paid advise session to make sure you know your rights.


The Rhode Island Family Court's New DR6 Financial Statement of Assets and Liabilities

If you've filed anything in the Rhode Island Family Court since the new nine (9) page DR-6 Financial Statement of Assets and Liabilities has been imposed by the court, then I'd like to hear from you.

I will tell you that it's no secret that both attorneys and clients are troubled by the form.

The form clearly strives to be just about as "all inclusive" as you can get and most assuredly is more time consuming both for the client to fill out and for the attorney either to review or to instruct the client on, wouldn't you think that some sort of instructions would have been created for the form?

Now, here's the strange part.  By reading this short article you might think me the pessimist and one to find fault with everything. However, for those those who know me I am quite the opposite and far from lazy.

As so many other divorce attorneys I take the DR6 Financial Form seriously which is as it should be since the form was presumably intended to help give the court and the opposing party a relatively accurate picture of the other party's financial perspective.

The form is supposed to be signed and sworn to under oath as being accurate.  It is also supposed to be updated as significant changes occur.  Additionally, the DR-6 Statement of Assets and Liabilities is a tool for both examination and cross-examination of a party.

I, for one, thought that either instructions or in the very least definitions would have been created for attorneys to direct our clients.  However, according to one attorney involved in form creation process there is no intention to do so at any time in the future.  

When I asked "Why?", the response was that the form was intuitive and rather obvious to follow and that attorneys would know what was intended.

I must disagree.  I've been called by people trying to represent themselves, countless clients and even other experienced family law attorneys asking what was intended to be filled into a particular area of the DR-6 form.

Disregarding the new rule that the DR-6 must be printed on "green paper" there remain too many unanswered questions about the form.

Just as the Child Support Guidelines provide for varying methods of calculation in different circumstances (or differing scenarios/possibilities) so too does the DR-6 form.

Is the DR-6 intended to show both parties collective financial picture if they are still living together?

Or,

Is the DR-6 intended to show only one party's contribution to the finances if the parties are still living together?

Or,

Is the DR-6 meant to include under the debt section the debts of both or the parties in the marriage?

Or,

Is the DR-6 mean to include in one person's form under the debt section the debts only that the person signing the form is paying?  Or perhaps it is only to fill out the debts that the person signing the form is legally obligated to pay regardless of whether they are paying them or not?

Under the child expenses portion of the DR-6 is this intended to include the child expenses of the parties, or maybe only the portion that party is currently paying?  Is the child expenses section only for minor children of the parties or is it for all children, including step-children?

What if the parties have always had separate financial accounts during their marriage but they have access to the financial information of their spouse's financial accounts?  Do they include those accounts since they might claim the accounts are marital funds earned during the marriage?

The same questions can be applied to assets.  If the deed to the house is in the wife's name and it was purchased during the marriage but the husband is on the mortgage to the house, then a lawyer might argue that it is a marital asset and therefore even though it is in the wife's name that it should be listed as real estate on the husband's DR-6 form, but is this what was expected by the creators of the form?  

If many lawyers and citizens of our good state don't know what was truly intended by each aspect of the form, then perhaps the creators of the form were not in the same page when designing the form. Whether or not that is the case, without guidance in the way of instructions or definitions providing some level of uniformity how can anyone be sure if they are filling it out correctly, instructing their clients correctly or even if the judges are interpreting it uniformly.

What do other lawyers, judges and consumers think about this form?

Did you like the Excel spreadsheet form or is the PDF Form working better for you?

I'll end with what one person said to me about the new DR-6 that made me laugh, namely,

"That Form is Cursed!"

I'd like to hear your comments.

All My Best to You on Your Journey Through The RI Family Court,
Attorney Christopher A. Pearsall - "The Rhode Island Divorce Coach"™ 
 

Call me for your reduced-cost family law advice session at (401) 632-6976. 



Vested versus Non-Vested Pensions - How are they treated in a Rhode Island Divorce Case?

QUESTION:

Attorney Pearsall, my wife and I are getting divorced in Rhode Island.  I have a pension that has been building up due to accrued time that I have put in over the years with my employer.  Ultimately, I don't know what it will amount to as far as monies are concerned when it finally vests or when I start taking pension distributions but it is something I feel strongly that I don't want touched.  How might the court treat my pension?

 

ANSWER:  

Thank you for your divorce question.  Pensions are certainly no stranger to the family court.  Generally speaking, the Rhode Island Family Court has the power to distribute only what is determined to be a marital asset of the parties.  

So a more direct question is, "what part of your pension is a marital asset."  If you started accruing time toward your pension before you got married, then that time and the monies that are attributable to it are not a marital asset, they are considered yours.  This is where the tricky part comes in.  Since your pension in particular is based on an accumulation of years which coincides to a certain amount of money once it is vested, then only the years you were married to your spouse are considered a marital asset that can be divided between you and your spouse.  However, if you have no actual monetary contributions to the pension and if you were to die today noone would get anything, then your pension's value is worthless as far as a value before the court.

If, on the other hand, you had contributed to your pension and you had contributions in the amount of say $32,000 but the pension hadn't vested and if you were to die today your beneficiary of the pension would merely get the contributions back, then that is the value of the pension $32,000.  Therefore, as long as all of the contributions were made during your marriage, then the $32,000 is a marital asset in your unvested pension that is subject to division between you and your spouse.

It can be a little tricky in Rhode Island divorces, especially when you are dealing with pensions, annuities, disability based incomes and retirement vehicles as to what is and what is not a marital asset divisible by the family court.

On the whole, whatever those marital years are, or whatever monies, if any, they may amount to before your pension vests are generally thought by many lawyers and judges to be divisible with 50% going to each party.  

Why is that the thought when Rhode Island is an equitable division (i.e. fairness based upon the circumstances) state for divorce purposes?  Well, the rationale often used is fairly logical.  It is simply that retirement vehicles such as pensions, 401K's, IRAs, etc.. were intended so that the parties would share those things equally when they retire.  Therefore, it makes sense to share the marital portion equally.

Typically, if a pension is vested then this becomes a rather complicated actuarial computation.  The computations is usually performed by the administrator of the pension at the time of distribution.  The administrator takes care of the distribution depending upon either what was settled upon by the parties to resolve their divorce, or what was ordered by the court, though usually the two are identical if the parties reached a resolution to their divorce by agreement.

In your particular case, you mention having a pension that has not yet vested. The question then must be asked whether it will vest before your divorce proceeding is done, if it will then you may have to do some bargaining with your spouse to make some trade-offs so your spouse doesn't take his or her rightful share of your pension.

If your pension has not vested, then it may have the value of it's contributions or it may be valueless.

As you can tell, this can be a complicated factor in divorces.  It is always best to consult a highly skilled legal professional to understands the ins and outs of your particular plan and the situations that may arise in the division of any plan.

I often explain to people that divorce doesn't have to be so difficult and confusing but make no mistake about it.  Divorce can be as complex as any other area of law with its finer points and details that can too easily be overlooked.

Take the time to get good legal advice.  It's worth it!
 

All my Best to All Who Go Before the Rhode Island Family Court,

I am Attorney Christopher A. Pearsall and I am "The Rhode Island Divorce Coach."


The Rhode Island Divorce Lawyer and RI Bankruptcy Fundamentals to Consider!

Do you live in Rhode Island?  Has the Rhode Island recession and economic depression that is spreading across our nation left you in financial turmoil and despair?  Many people don't realize that answers to their financial troubles are available.  In times like these many people are so overwhelmed by rising mortgage payments, credit card bills and auto loans that they don't realize that what they may need is information from a Rhode Island Bankruptcy Lawyer.

Bankruptcy, whether it be in Rhode Island or another state has typical psychological stigmas attached to it.  For instance, some people believe that if they file for bankruptcy in Rhode Island that they will be considered permanent deadbeats to every creditor on the planet.  Other Rhode Islanders may believe that the moment they file for bankruptcy that their credit will be destroyed for the next 7 to 10 years and that they won’t be able to survive because of it.

A Rhode Island Bankruptcy does have certain practical and adverse aspects that a good Rhode Island Bankruptcy Lawyer will advise you about.  However,  there are also other considerations that a Rhode Island lawyer who is knowledgeable in the area of bankruptcy filings is likely to call to your attention that may be beneficial to you both in the short term and in the long-term. 

Filing for bankruptcy may affect your family's security and even your future financial success but it is not always for the worse.  When coupled with a Rhode Island divorce proceeding, a bankruptcy may actually be helpful but I’ll address that type of situation in another article.

 So what should you expect from a bankruptcy lawyer that you are considering hiring?

A good Rhode Island bankruptcy lawyer will apprise you of the types of bankruptcy, the process for each type of bankruptcy that could apply to you and perform an analysis of the type or types of bankruptcy filing that might suit you best depending upon whether you are a Rhode Island individual, married couple, divorcing couple or a Rhode Island business. 

If you are able to provide the bankruptcy lawyer with a sufficient amount of information, he or she will also be able to explain to you the benefits of one type of bankruptcy filing as opposed to another, including the short-term and long-term affects of a bankruptcy filing or the issuance of a final discharge by the United States Bankruptcy Court for the District of Rhode Island.

Seeking the assistance and counsel of a Rhode Island Bankruptcy lawyer is both a smart and responsible decision for any individual, family or business in the midst of financial crisis, including times when a Rhode Island divorce is contemplated or pending, provided you also speak with your Rhode Island divorce lawyer.  

Should you need assistance with a Rhode Island Bankruptcy during, prior to, or in connection with a Rhode Island Divorce , please do not hesitate to contact me at 401-632-6976 for my affordable Coaching Session or I will happily direct you to a fantastic Bankruptcy Attorney in Rhode Island if appropriate.

Authored by:  Christopher A. Pearsall, Attorney-at-Law
Copyright 2010 to Present - Christopher A. Pearsall (All Rights Reserved)