Opinion ID: 1279878
Heading Depth: 1
Heading Rank: 2

Heading: post-separation earnings.

Text: The division of property in a divorce action is controlled by AS 25.24.160(4), [1] which states in relevant part that the trial court may divide the parties' property, whether joint or separate, acquired only during coverture, in the manner as may be just, under a balancing of the equities approach. The words acquired only during coverture were added by amendment in 1968, indicating that, in general, it is only property created by the enterprise of marriage that should be subject to division. [2] The rule that has evolved in Alaska for dividing assets acquired after a separation resulting in a divorce is based on the source of the payment with which those assets are acquired. In a case where the parties were separated for four years prior to their divorce, we affirmed the superior court's inclusion of assets accumulated during that period as property subject to division. Bussell v. Bussell, 623 P.2d 1221, 1223 (Alaska 1981). [3] We held that even if we were to apply the doctrine of equitable divorce, there was sufficient evidence to uphold the superior court's finding that the parties did not consider the marriage ended when they separated. Id. at 1223. We also stated that since a significant portion of the expense involved in accumulating the post-separation property was paid for out of pre-separation assets, it was not unjust that the property be divided between the spouses. Id. at 1223 n. 3. We elaborated on this rule in Hunt v. Hunt, 698 P.2d 1168 (Alaska 1985), [4] where there was a seven-month period between the separation and the divorce. Rather than laying down a rule to determine precisely when coverture had come to an end, we held that property accumulated during the period between separation and divorce should be divided into two categories: 1) property acquired with assets which, had they not been used in such acquisition, would have been subject to division, and 2) property acquired with assets, such as post-separation income, which, had they not been used in such acquisition, would not have been subject to division. Id. at 1171. Property in the first category would be subject to division, while property in the second category would not. Under this approach, we held it was not an abuse of discretion for the superior court to exclude the value of real estate the husband purchased with loans from a close corporation that was marital property. Since the loans were made after the parties separated, and therefore the wife would not be liable for them, the buildings for which they provided the down payment were properly excluded as being acquired with assets which would not be the subject of property division. Id. at 1172. In Hunt, we also found that the superior court did not abuse its discretion in excluding from marital property personalty in the husband's new residence, despite a lack of evidence as to the precise source of funds for these purchases, absent any evidence that [the husband] invaded property which should have been divided. Id. at 1172. [5] Finally, we concluded that valuing the husband's retirement benefits at the time of separation rather than at the time of divorce was not an abuse of discretion. Id. at 1172. These cases provide a general framework for the division of post-separation assets. As a general rule, we hold that property accumulated with income earned after a final separation that is intended to, and does in fact, lead to a divorce is excluded from the category of marital property, as long as it is obtained without the invasion of any pre-separation marital asset. [6] We decline to specify, as a matter of law, that the effective date when such earnings become severable from marital property is at separation or at filing for divorce. Each case must be judged on its facts to determine when the marriage has terminated as a joint enterprise. In the instant case, we accept James' use of the date on which Norma filed for divorce as a reasonable cut-off point for this purpose. [7] James claims that of the nineteen items the superior court included in reaching its total of $277,147 in marital assets, five items include post-separation earnings which should have been excluded under Hunt. His first objection is to the valuation of his thrift plan with his employer. In as much as contributions to a thrift fund, whether made by the employer or the employee, are a form of earnings, they will be severable from marital property, once the marriage as a joint enterprise has ended. Cf. Hunt, 698 P.2d at 1172. [8] Norma maintains that interest on contributions to both the thrift plan and the retirement fund made subsequent to her filing for divorce should be included in marital assets. We hold that interest earned after filing on contributions made before filing are part of the marital assets. Interest earned on contributions made after filing are not included in the divisible property. The four other items that James disputes are controlled by similar reasoning. James' retirement plan contributions made after Norma filed for divorce are properly excluded under Hunt. At the time Norma filed, the plan was worth $13,751, but by the time the decree was issued, it had grown to $21,280. This $7,529 growth should have been excluded from marital assets to the extent it was composed of post-filing contributions and interest earned on post-filing contributions. The third disputed item is the Schancks' savings account at the First National Bank. James contends that the account contains a $6,675 annual bonus that was paid to him in early 1984, which should have been excluded from marital assets. The documentary record supports this contention. While we agree with his reasoning, we also note that since half of the year-end bonus was earned prior to the filing for divorce (i.e. during the period January 1, 1983, to June 6, 1983), it is arguable that only half should be excluded from the couple's marital assets. The fourth disputed item is the $4,700 in James' checking account, which he claims was composed of $3,200 from his paychecks in the two weeks prior to trial, and $1,500 from his son Jay's savings. If these contentions are supported on remand, then the respective sums are properly excluded. Finally, the fifth disputed item is $3,700 worth of furnishings in James' apartment, most of which, he contends, were purchased with his salary after his separation from Norma. Nonetheless, if these items are to be excluded from marital property on remand, the superior court should check the list of furnishings (Defendant's Exhibit F), in order to determine which particular items constitute most of these furnishings. In sum, under James' arguments, the five disputed items include post-separation property which should have been excluded under Hunt. We remand the disputed items to the superior court for determination of the exact amount that should be excluded.