Domestic Relations — Equitable Distribution & Alimony – Separate Property – Post-Separation Appreciation – Retirement

Since part of a retirement account was the defendant-Husband’s separate property, the trial court erred when it ruled that all passive post-separation appreciation in the account was divisible property.

We vacate the equitable distribution order and remand for further findings. We affirm the alimony order.

Retirement

Husband argues the trial court erred in finding that he was not retired at the date of hearing, citing his testimony that his employment was involuntarily terminated and the trial court’s statement that it did not “think it is a dispute that he was involuntarily terminated.” Although Husband argues that he “clearly and unambiguously testified that he was retired,” the transcript reflects that Husband answered questions regarding his employment status with varying degrees of clarity.

The trial court considered Husband’s testimony that he was retired while also noting Husband’s testimony regarding contacts and job search efforts made in 2018. The trial court’s finding acknowledged Husband’s “differing answers” and in light of the “various discrepancies and inconsistencies,” the trial court was “not persuaded [Husband] is ‘retired’, unemployable or that he is unable to find suitable work given his employment history and education.” Based on competent evidence including Husband’s testimony, the trial court evaluated Husband’s credibility, and based on that evaluation, it was reasonable for the trial court to find that Husband was not retired or unemployable at the date of the hearing.

Retirement Account

Bonnie Bowen was called by Husband and stipulated by the parties as an expert witness in valuation of retirement benefits. Bowen’s account summary provided that Husband’s Vanguard account totaled $100,025.00 in marital property and $312,135.00 in Husband’s separate property at the date of separation and appreciated to $120,559.00 in marital property and $376,211.00 in Husband’s separate property as of 31 March 2019.

Although the trial court accepted Bowen’s testimony and calculations, it determined that Husband “failed to establish that this divisible income was separate property, therefore the presumption that this increase is marital remains and the Court treats this $84,609 as marital property for the purposes of equitable distribution.” The evidence presented and accepted by the trial court does not support the trial court’s finding that the entire increase of $84,609.00 was marital property because the evidence shows passive appreciation of $20,534.00 on the marital portion of the Vanguard account; this appreciation would be divisible property. Although the passive appreciation of the marital portion was divisible property, the passive appreciation on Husband’s separate portion of the Vanguard account should have been classified as his separate property.

The trial court abused its discretion in finding that the entire increase of $84,609.00 was marital property, as the evidence supported a finding that only the $20,534.00 increase in the marital portion of the Vanguard account was divisible property. We vacate this portion of the order and remand to the trial court for entry of an order correcting this valuation and classification.

Husband’s Income

As to Husband’s income, the trial court found he began receiving Social Security benefits of approximately $2,500.00 per month in January 2019. The trial court also found “[Husband]’s testimony about his lack of funds and inability to pay Alimony are simply not credible. [Husband] has ample means and ability to pay Alimony, and to pay such Alimony as ordered herein.”

Significantly, the trial court found that “[Husband]’s lack of employment, coupled with his lack of candor as to the extent of any real property he owns in Ghana, appears little more than strategy he has designed to minimize potential ramifications or obligations pertaining to Alimony and Equitable Distribution, among others.” This finding, coupled with the trial court’s finding that it considered the “earnings and earning capacities of the parties[,]” reflects that the trial court determined that Husband had depressed his income and assets in bad faith and accordingly considered his earning capacity as well as his current income. The trial court did not abuse its discretion in considering Husband’s earning capacity in setting alimony.

Affirmed in part; vacated and remanded in part.

Concurrence & Dissent

(Tyson, J.): I concur with the majority’s opinion holding that the entire passive appreciation in the Vanguard account of $84,609.00 was marital property is unsupported. This erroneous classification was also used to support the trial court’s award of alimony and its unequal equitable distribution in favor of the plaintiff-Wife. The trial court’s award of alimony and equitable distribution should also be reversed and remanded.

Undisputed facts show that, at the time of the hearing, Husband had been terminated from his last employment, was 67 years old, and had retired. He had begun to draw payments from Social Security. Husband also can take distributions and withdrawals from his retirement accounts and pension plan.

The trial court’s improper attribution of the Vanguard account’s appreciation as marital property affects Husband’s income as a retiree at the time of the award. The error we all agree occurred renders the trial court’s alimony award wholly speculative.

Wife also failed to meet her burden to overcome the statutory presumption of an equal division of the marital estate. On remand, the trial court should award an equal distribution, unless Wife carries her burden to overcome the statutory presumption by showing entitlement to greater than an equal amount.

Asare v. Asare (Lawyers Weekly No. 011-001-22, 52 pp.) (Donna Stroud, C.J.) (John Tyson, J., concurring in part & dissenting in part) Appealed from Wake County District Court (Debra Sasser, J.) No brief filed for plaintiff; Travis Taylor for defendant. 2022-NCCOA-1