Family Case Law – DIVORCE: Equitable Distribution

Family Law Case Law Update – Divorce: Equitable Distribution, May 2012

By Cynthia Bashore, Esquire, Attorney,

In Goodemote v. Goodemote, 2012 Pa Super 24, the Court held, in divorce, that the increase in value of Husband’s investment account, funded by his pre-marital deposits of his federal veteran’s disability benefit payments, is marital property, subject to equitable distribution. Husband had never withdrawn any funds from his pre-marital investment account, and he never used those funds for his support and maintenance. As of the date of marriage, the value of the investment account was $74,374. Although no post-marital contributions were made to the account, when the parties separated 16 years later, the value was $158,932, an increase in value of $84,557.

In this case of first impression, the Court addressed the United States Supreme Court’s decision in Porter v. Aetna Casualty & Surety Co., 370 U.S. 159 (1962). In that case, the guardian of an incompetent veteran deposited a portion of the veteran’s disability payments into a savings and loan account, and a creditor thereafter sought to attach those funds to satisfy a judgment. The Supreme Court held that the veteran’s disability payments retained their exempt status under 38 USCA §5301 even after being deposited into a federal savings and loan account. The Court reasoned that Congress intended that veterans, in the safekeeping of their benefits, should be able to utilize those “normal modes adopted by the community for that purpose,” provided that the benefit funds (1) are readily available as needed for support and maintenance, (2) actually retain the qualities of moneys, and (3) have not been converted into permanent investments. To determine whether the benefits had been “converted into permanent investments,” the Court applied a 3-prong test: (1) whether the funds were “of a speculative character”; (2) whether the veteran used the moneys from the savings and loan fund for his support and maintenance requirements; and (3) whether other funds were then available to him, his disability payments having been cut off.

In the instant case, the Court ruled that the increase in value of Husband’s veteran’s benefits were marital property subject to equitable distribution because Husband failed to meet the third prong of the Porter test, as he had converted the VA payments he deposited in the investment account into permanent investments. Moreover, Husband’s VA payments were not his only means of support, he never withdrew any funds from the investment account, nor did he use the funds for his maintenance and support. Therefore, Husband’s VA payments lost their exempt status when Husband converted the funds into permanent investments by placing them in his investment account.

If you have questions regarding this case or if you are experiencing a similar issue, please contact Cynthia Bashore, Esquire to discuss the details of your specific situation.