Supreme Court alters equitable distribution award and reverses reservation of alimony

N.B., on May 8, 2013, the South Carolina Supreme Court slightly modified its original opinion.  For more information read Supreme Court reconsiders equitable distribution of marital home.

The February 20, 2013 Supreme Court opinion in Wilburn v. Wilburn deals with numerous interesting, sometimes novel, equitable distribution issues.  The appeal stemmed from a divorce action in a long marriage in which Husband had substantial pre- or non-marital assets and was also partially disabled.  The issues resolved by the Supreme Court included:

Husband’s Federal Annuity Payments were marital property subject to equitable distribution because these payments were in the nature of retirement that Husband simply began receiving before retirement age due to his disability.

Husband failed to meet the burden of proving that certain accounts were non-marital because Wife presented evidence that these accounts has been partially funded during the marriage from marital assets.

Reversing a finding that a timber farm that Husband inherited from his mother and was valued at $740,710 had become marital property through transmutation.  It found that Wife’s contributions to managing this tract were insufficient to cause transmutation.  If further held that “the use of income from the property in support of the marriage does not establish transmutation.”

Wife’s testimony was sufficient to establish that accounts she owned were non-marital.  The Supreme Court held that there is no absolute requirement of providing documentary evidence to establish that accounts are non-marital.  The Supreme Court noted, “Husband did not contest Wife’s testimony that the assets in her accounts were nonmarital.  His failure to offer evidence controverting Wife’s testimony is sufficient justification to affirm the family court.”

In a case of first impression in South Carolina, held that distributions Husband received from a trust he did not own were a marital asset subject to equitable distribution.  Case law from other states held similarly.  As the Supreme Court noted, “The parties did not direct us to any cases holding that trust distributions were not marital property, and we have found none. Therefore, while we hold the trust corpus is not the property of either spouse and thus cannot be marital property, we hold that trust distributions can be marital property depending on how and when the interest was acquired or if the interest has undergone transmutation.”

In finding that this trust had been transmuted, the Supreme Court noted, “the trust distributions had undergone transmutation because it based its holding on findings that the intent behind the creation of the trust was to provide the parties with income during their lifetimes…”

Given that the family court found Wife’s equitable distribution assets were sufficient to support her, the Supreme Court reversed the family court’s reservation of jurisdiction on alimony.  The Supreme Court noted, “Alimony may be reserved where the family court identifies circumstances that are likely to create a need for alimony in the reasonably near future. Where a spouse does not need alimony at the time of trial and there is no evidence the spouse has an illness, the spouse’s needs will foreseeably change in the near future, or some other extenuating circumstance, it is error to reserve jurisdiction on alimony.” (citation omitted).

The Supreme Court also noted that the family court order had failed to properly credit Husband for his reduction in mortgage principal on the marital home after the date of filing and reduced the amount of Wife’s equitable distribution award accordingly.  Over Husband’s objection, it approved the family court’s 55/45 distribution of the marital assets to Husband (while modifying the amount he needed to pay Wife to effectuate this distribution based on its other holdings).  Finally, based in part on the successful results Husband achieved on appeal, it reduced the amount of attorney’s fees and costs he was required to pay Wife from all of her fees and costs ($156,182) by half.


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