Opinion ID: 2633636
Heading Depth: 3
Heading Rank: 4

Heading: The Equitable Division of the Marital Estate and Invasion of Bill's Separate Property

Text: Bill challenges the division of the marital estate and the invasion of his separate property. Both Bill and Carey appeal the amount by which the superior court invaded Bill's separate property as being arbitrary. Bill additionally argues that the lump sum form of the required payment of $2.25 million imposed upon him an impermissible hardship. We agree that it was error to invade the separate estate without first determining whether an unequal division of the marital estate would properly balance the equities between Bill and Carey. We therefore remand for a re-examination of the division of the marital estate. The division of marital property in a divorce is a matter of discretion for the trial court. [65] But in exercising that discretion, the trial court should follow a process incorporating a number of statutory and common law principles. [66] Since Wanberg v. Wanberg , we have articulated this process as a matter of three steps: First, the trial court must determine what specific property is available for distribution. Second, the court must find the value of this property. Third, it must decide how an allocation can be made most equitably. [67] Again since Wanberg, we have consistently noted that the trial court generally should begin with the presumption that an equal division of marital property is most equitable. [68] We have also noted that this presumption can be overcome by a consideration of the Merrill factors [69] as codified and expanded in AS 25.24.160(a)(4). [70] But if either spouse owns separate property, then, as we noted in Chotiner, the division of property actually involves more than three steps. The court must determine what marital property is available for distribution, value that property, and make an equitable division if possible. If an equitable division is not possible, the court turns to the parties' separate property. [71] It is clear from this language in Chotiner that the decision to invade separate property may be undertaken only after the trial court has attempted to use the marital estate to balance the equities between the parties in light of the parties' reasonable needs. It is only if that attempt has failed that the trial court should turn to the separate estate and proceed to adjust the initial distribution as needed. [72] In this case, the superior court invaded Bill's separate property before effecting an uneven division of the marital estate, including assets and debts, in light of Carey's reasonable needs. Indeed, the marital estate was divided in a manner that benefitted Bill, rather than Carey. [73] Rather than dividing the marital estate unequally in an initial attempt to balance the equities, the superior court turned to Bill's separate property. [74] It was error to invade the separate estate without first considering other equitable methods of distributing the marital estate in light of the parties' reasonable needs. The superior court found, in light of the Merrill factors, that the value of the marital estate was relatively small; that Carey had been long absent from the workforce; and that Carey lacked both retirement funds and other financial resources. The superior court particularly found Carey to be unable to generate an income level that even remotely resembles the manner of lifestyle [to] which she and the children have been accustomed. [75] As a whole, these factors suggest that a large deviation from the equal division of the marital estate is justified. But in some cases, even a large deviation from the equal division of the marital estate will not be sufficient to fairly allocate the economic effect of divorce. [76] The legislature has recognized that invasion of separate property may be necessary and has provided that the court, in making the [property] division, may invade the property, including retirement benefits, of either spouse acquired before marriage when the balancing of the equities between the parties requires it. [77] In Sampson v. Sampson , we determined that the Merrill factors [78] applied to the decision whether to invade separate property. [79] In Sampson, we explained that courts should particularly consider factors such as the duration of the marriage, the conduct of the parties during the marriage, the manner of acquisition of the property, its value at the time of acquisition and at the time of the property division, and any other factors bearing on whether the equities dictate that the other spouse is entitled to share in that property. [80] In this case, the superior court relied on its finding that the parties lived an opulent and wealthy lifestyle and that Bill will continue to have access to such luxuries and wealth from the Odom Corporation after the divorce while Carey will no longer be the beneficiary of these privileges. But in Alaska it is not expected that a former extravagant lifestyle will be supported. [81] The proper test to be applied by the trial court is the reasonable needs of the parties. [82] The result of the property division must not lead to a widely disparate lifestyle between spouses, particularly when children are involved. The trial court's goal should be to provide Carey with a comfortable and financially secure lifestyle, where her activities and the children's hobbies are able to continue and the children live in comparable surroundings when with either parent. Carey did provide evidence of her reasonable needs. In the trial court, Carey submitted two projected monthly budgets ranging from $11,550 to $12,489. The superior court presumably considered these projections when it awarded Carey $8,000 a month in interim support pending the ordered lump sum payment of $2.25 million by Bill. After weighing the conflicting evidence concerning Carey's reasonable financial needs, the superior court certainly could have found that the equities demanded that 100% of the marital assets be allocated to Carey and 100% of the debt to Bill. [83] Indeed, in her proposed findings in the trial court, Carey urged the court to award her such marital assets as the Anchorage and Girdwood residences free of debt as a first step toward equitable division. As she remarks in her brief to this court, [t]his would have given [Carey] ... saleable and appreciating assets that could provide reasonable financial security and something approaching the lifestyle that the family enjoyed during marriage. [84] And if, after such an unequal division of marital property, the trial court were to find that Carey's reasonable needs would still go unmet, then long-term spousal support might be warranted. [85] In Alaska, awards of spousal support are permitted under AS 25.24.160(a)(2) if they are determined to be just and necessary. The legislature provided a number of factors [86] to help determine the amount and form of spousal support. For example, in Broadribb v. Broadribb, we affirmed the superior court's finding that the available property in this case was insufficient to compensate Sandra adequately or to provide adequately for her reasonable future living expenses. . . . Given Sandra's age and limited earning capacity, the court concluded that it is questionable whether she will accrue any substantial employer-provided pension in her remaining work years, and that she will therefore need to invest a significant sum to provide for her future needs. Against the backdrop of these findings, the court awarded Sandra spousal maintenance in the amount of $3,000 per month for three years, and $2,000 per month for two additional years. Based on its extensive findings regarding Michael's financial status, the court concluded that he would be able to pay this amount of maintenance.[ [87] ] And Bill's financial status, including his separate property, can be taken into account when awarding spousal support. [88] Initial consideration of the unequal division of the marital estate and spousal support may have rendered unnecessary the invasion of Bill's separate property and avoided the practical problems entailed in such a large lump sum payment, as well as the issue of the excessive size of the invasion. [89] In this case, the invasion of the separate property in the sum of $2.25 million was an abuse of discretion. Thus, we vacate the division of the marital estate and the lump sum award of $2.25 million and remand for reconsideration of the property division so that the trial court may examine an unequal division of marital property, with an award of most or all assets to Carey and the debt to Bill, along with the possibility of spousal support as the preferred method of meeting Carey's reasonable needs in this case. [90]