Husband’s family farm is ‘marital’

Husband’s Family Farm is ‘Marital’

By Deborah Elkins
Published: December 15, 2011

Tags: , Tucker Griffin Barnes, ,
 
When husband and wife sold their home and purchased the 19-acre family farm in Nelson County from a trust set up by husband’s parents to hold the farm as property for their four sons, the farm became marital property and the Court of Appeals upholds classification of the farm as marital property.

On appeal, husband contends the farm should have been classified as part marital, part separate, since he separately “owned” a one-fourth interest in the farm with his three brothers after his parent sold it to a trust.

Under Va. Code § 20-107.3(A)(3), to the extent property is retraceable by a preponderance of the evidence and was not a gift, the retitled property shall retain its original classification. When marital property and separate property are commingled into newly acquired property resulting in the loss of identity of the contributing properties, the commingled property shall be deemed transmuted to marital property.

The question here is whether husband successfully retraced one quarter of the farm to his separate property by a preponderance of the evidence.

Husband initially approached his mother seeking to purchase the farm. She agreed and directed the trust to sell the farm. In Virginia, a trustee is required to administer a trust and invest trust assets in good faith, in accordance with its terms and purposes. A trustee, without authorization by a court, may exercise powers conferred by the terms of the trust.

In this case, the farm was initially conveyed to the trust and therefore was governed by its terms.

Specifically, the terms of the trust required that the trustee hold all real property, for the parents’ lifetime or until such other time as the parents, jointly, or the survivor of them instructs the trustee to sell or otherwise distribute the trust assets as herein provided. Thus, upon instruction from the parents to sell the farm to husband and wife, the trustee was obligated to comply.

Ultimately, the sale of the farm was executed between the parents, the brother who served as trustee and husband and wife. Thus, at a minimum, the farm became transmuted, untraced marital property following the sale. At this point the farm was no longer an asset of the trust and therefore was not subject to any of its terms. The trust provision governing distribution of the farm as a trust asset upon the parents’ death became irrelevant and husband could not receive any interest in the farm through the trust. Under the plain terms of the trust, the brothers would only receive an equal share of the remaining trust assets upon the deaths of both parents. In other words, the trust gave the brothers a vested remainder in the trust assets that would not ripen into actual title until the deaths of the parents. By removing the property from trust assets, husband and brothers no longer had a future interest in the farm, and husband and wife thereafter possessed the farm as marital property.

The evidence also does not support husband’s contention that one-fourth of the farm was given to him as a gift. The farm was paid for using the proceeds of the sale of husband and wife’s house. Though the contract price was $100,000 and the note evidencing the debt for purchase of the farm was only for $75,000, this merely suggests there was a forgiveness of $25,000 in debt.

Because the farm was sold to husband and wife jointly, and husband did not inherit or receive the property as a gift, the circuit court did not err in finding it was marital property.

Stevens v. Stevens (Humphreys) No. 0498-11-3, Dec. 13, 2011; Nelson County Cir.Ct. (Gamble) Linda S. Jones for appellant; C. Lynn Lawson for appellee. VLW 011-7-393, 8 pp.

RELATED ARTICLES (VLW 011-7-393)

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