Another Question about LAWSUIT SETTLEMENTS as Shared Income

[Targe]

SITUATION:  Man (friend of mine) and Woman married in 1997.  The wife had two sons by a previous marriage, but did not have custody.   The sons are aged 21 and 26 now.  The present husband never adopted them or otherwise incurred any sort of financial obligation for them.

At the time of marriage in 1997, the husband was Active Duty Military (full time).  Wife was not working at the time but starting in 2001 and continuing to the present (2006), the wife has intermittently worked temporary positions averaging approximately 7 months each year with salaries slightly exceeding that of the husband.  The couple now live in Alabama, having moved there in 2000. 

In 2002 the wife's mother died in a hospital due to negligence.  Also in 2002, the husband's father died of cancer.  In early 2003, the wife received a settlement of approximately $250,000 for her mother's death the previous year.  Also in 2003, the husband received approximately $36,000 in estate settlement from his father's death the previous year.  The money was used to build a new home valued around $200,000, purchase two vehicles, each valued around $20,000, and pay off credit card bills (joint accounts).  The couple moved into the home the same month the husband retired from the military.  He began receiving approximately $1650.00 monthly retirement income. 

The wife worked an average of 7 months a year from 2003 until present.  The husband did not work during 2004 because he attended college full time.  The husband began a full time job in 2005 which he continues to work in with an annual salary of approximately $52,000. 

Within the last month, the wife filed for divorce due to irreconcilable differences (no allegations of wrong doing against either party). 

'PROBLEM':  The wife is demanding the house be given over to her solely on the basis that it was "her money" from her mother's death through negligence lawsuit that directly purchased the home.  Wife is also seeking alimony (temporary and permanent) even though she has a demonstrated ability to work and in fact, is in the process of being hired for another term position.  Since 2001, her average income (working 7 months a year) has been around $40,000.

However...the husband counters that he:

(1) provided a home for the wife for the 6 years prior to her receiving the lawsuit settlement

(2) invested the money ($36,000) he received from his father's estate directly into improvements/upgrades/upkeep of the home (purchased in 2003)

(3) continued to invest money he received as salary from his second (post military) job/career into the home on a daily basis (utiities, groceries, etc.)

AND

(4) sent $1800 monthly from 2003 until early 2006 to his wife's (now) 26 year old son when her son returned to college (rent, food and student loan interest payments). 

Regarding the last point....the husband and wife AGREED to the arrangement of buying the house outright with the money the wife received from the lawsuit settlement and sending her son $1800 a month.  Had that lawsuit money not 'appeared', they would have purchased the same home using as down payment the money the husband received from his father's estate settlement along with his monthly retirement check for mortgage payments.  (And the husband would have immediately began a second career/job).  In that alternate scenario (husband's estate settlement as down payment with a mortgage paid by his retirement), it's doubtful they would have been able to also send her son $1800 monthly since their first priority would have been to purchase a home. 

It's important to note that the $1800 was sent to the wife's son even during the months when she was no employed.  Also, just to round out the picture, the husband is very frugal and spent very little money on merchandise or services for his sole use and pleasure (i.e. no new golf clubs, motorcycle, bass boat, etc.)

In short, the marital home could and would have been purchased on the sole basis of the husband's estate settlement, retirement income and salary 'even' in the absence of the wife having received the lawsuit settlement.  That is, the purchase of the marital home was not facilitated solely by the wife's lawsuit settlement that she received after 6 years of marriage.  In addition, the husband has contributed significant amounts of money both to the upkeep/improvement of the marital home and overall household budget (including $1800 monthly to the wife's son) in the 3 years since it was purchased.  In addition. the deed to the house lists BOTH the husband and wife as owners.

BIG QUESTION  What is the likelihood that the marital home will be considered as the sole property of the wife simply because it was money she received from the lawsuit settlement that 'directly' purchased it outright? 

The opinion of the husband in the case and my opinion is that the money from the lawsuit settlement was shared income and the property (house) purchased with it became community property and as such the value of the home should be divided equally.  After all, the wife shared freely of the money in the bank over the 9 year period even when she was not contributing to it, to include sending $1800 a month to her grown son.  In addition, she came into the marriage over $30,000 in debt and with a pending foreclosure...which the husband paid off AFTER they were married.   Personally, I think she was basically using him for financial security and after she (1) got a house and (2) got her son put through college she's ready to ditch him and expects to walk away with 'everything'. 

Also....predictions on alimony for the wife?

[Lee Borden]

We all want to help, but you're setting up a barrier by providing so much information. Please re-post, including only one or two questions and only those facts needed to answer the questions you ask. That way, I bet you'll get more useful information.

[Dallas]

Not too much for me.

Taking the facts presented at face value and barring any omissions on your part, I believe that a reasonable judge would rule the house is marital property.  Given the wife's history of work, I would also believe that a reasonable judge would not award much if any alimony.

If the husband and wife sticks to their guns, then a contested divorce will eat up all the assets and the point will be moot.

http://www.uexpress.com/tellmeastory/index.html?uc_full_date=20010722.

Dallas

[Targe]

LB:  "Please re-post, including only one or two questions and only those facts needed to answer the questions you ask."

Lee, thanks for your response.  I knew mine was a rathy lengthy post with minute detail but I thought it would be better to get any and all potential factors up front.  I'm not an attorney but we've researching online as much as possible.  The problem is that we cannot find any references to how Alabama law treats money received from a lawsuit settlement by one person in a marriage.  That's why I wanted to provide as many details as possible.  If there are any 'simple rules' that apply, please share them, i.e. money from a lawsuit IS or IS NOT treated the same as inheritance -?  In the absence of any set rule/guidelines, it seemed to me other factors would be pertinent.

The laws regarding inheritance in Alabama are fairly easy to find...but I don't think a lawsuit settlement should be handled the same way since it's simply NOT an inheritance.  The wife in this case makes much about the fact that it was her mother's death that initiated the lawsuit but -as terrible as that was- that's realy only the circumstances of the lawsuit and the fact remains that money from a lawsuit could have come about because of all sorts of reasons/circumstances.  In short, her mother did not 'give' her the money.  Instead, it came about because the wife filed a lawsuit against the hospital and retained a legal firm to represent her.

The signficance I place on that last point (and I realize this is just my take on 'common sense') is that if the situation were reversed -that is, the wife had a judgment AGAINST her in a lawsuit- it could have affected the community property of both the wife and the husband even if the husband had no direct involvement in the specifics of the lawsuit against his wife.  For that reason, the decision to proceed with the lawsuit was made by BOTH the wife and the husband.  The law firm that took the case took it with no money up front in the expectation that they would win; however, if they had not won, then the wife would have been liable for substantial legal fees which would have been paid for out of the shared income the risk of which the husband was fully aware and accepted.  In short, the husband shared the financial risk of a failed lawsuit.  So why shouldn't any money 'WON' in a lawsuit by one or the other party be considered shared income -?

Plus, he never treated any money he earned during the marriage as solely 'his' money to include being willing to support her son when he returned to college.  Are these extraneous details?  I think not given that Alabama law does not seem to have any 'simple', straightforward rules/guidelines for how money received by one spouse from a lawsuit settlement is viewed.   Thus, I thought it important to paint a fairly detailed picture of how all financial matters were handled during the marriage.

That said, I'll try to sum all of this up with a few succinct questions:

(1) Is the money from the lawsuit likely to be considered shared income or to be the sole income of the wife? (and of course along with that, if shared income then that would indicate that the home purchased with the money would be community property and more or less equally divisible, right?)
(2) As with inherited assets, does the fact that the money was used to purchase a marital home basically remove any 'protection' it would have had?
(3) Does the fact that the house deed has BOTH names on it 'automatically' make it community property?

_____________________________________________________________________________________________________________________

Dallas:  thanks for your reply!  If nothing else, I appreciate your reassurance that my friend does seem to have grounds to seek treatment of the marital home as community property derived from shared income.  If there's any sort of case precedent to which you could steer us it'd be appreciated.

[Targe]

Lee in another thread, you posted:  "The key is that when you receive it, you place it in an account in your name only, ideally created for this purpose, and that until the divorce is effective you don't make deposits to that account or withdrawals from that account for any purpose. If you do that, the money should be yours without any participation in it by your STBX.

Any attempt on your part to "give" the money to someone else will just make the money look more marital. Don't go there."

With that in mind, in the case I described, would the fact that the settlement money was used to buy a home in which the husband also contributed signficant amount of money, time and effort basically mean that the settlement money was "more marital" -?