In a Rhode Island divorce, separation and other miscellaneous family law matters which involve the equitable division of the marital estate of two individuals, the Rhode Island family court has the power to divide the marital assets of the parties.
The specific focus of this Rhode Island Coaching tip relates to the inheritance of items. One of the more common items inherited are stock shares and/or certificates.
Since there are countless variations of inheritances, types of items inherited, etc . . this tip is limited solely to stocks that are inherited by only one spouse during the marriage.
Consider this example.
Jeremiah and Pamela have been married for four (4) years. There are no children of the marriage and they do not own any real estate. For the past four (4) years Jeremiah has paid the rent on their apartment and all of the household bills while Pamela has attended school to become a nurse.
Jeremiah files for divorce. During the divorce proceedings, Pamela's older brother passes away and Pamela inherits seven thousand (7,000) shares of stock in Ford Motor Company which her brother's estate transfers into Pamela's name. The estimated value of the Ford Stock is forty-five thousand dollars ($45,000).
The Ford Stock is the only actual asset that either party has that has any real value to it.
Jeremiah calculates that all the bills he has paid for them during their marriage is about $53,000. Jeremiah believes its fair that he receive something for supporting Pamela for four (4) years while she attended school.
Jeremiah demands one half of the Ford Stock to compensate him for Pamela's half of the all the rent and bills that he has paid for the past four (4) years claiming that this is less than 50% of Pamela's share of the bills and therefore it is fair and equitable.
Pamela doesn't have a family law lawyer and thinks that this sounds reasonable. Before signing the settlement documents Pamela schedules a coaching session with Attorney Pearsall.
Pamela discovers that Jeremiah can't touch the inherited stock and that it is solely hers and not even part of the marital estate. Pamela is confused because she received it during the marriage. She does not understand why it isn't marital property.
Rhode Island Family Law Coach Christopher Pearsall takes time to coach Pam through the thought process.
ATTORNEY PEARSALL: Pam, it's nice to meet you and I'm sorry to hear about the loss of your brother, especially during a difficult time such as a divorce.
PAMELA: Thank you Mr. Pearsall. It is very upsetting to lose my brother and to have to deal with a divorce too. I just want this divorce done with.
ATTORNEY PEARSALL:: I completely understand Pam, but since you've come to me I want to make sure you are informed. You have a specific issue about stocks you inherited when you brother died and your husband wants half of them in the divorce to make up for half of the bills he paid for both of you while you were married. Did I get that right from your call.
PAMELA: Yes Sir.
ATTORNEY PEARSALL:: You can call me Chris. You've got enough on your plate without being formal with me. After all, I'm here to help you.
PAMELA: Okay Mister... I mean Chris.
ATTORNEY PEARSALL: Okay, well first Pam, there's a law in Rhode Island that makes inheritances exempt from the marital estate. I'll give you a copy of that law before you leave.
Now, there are exceptions to that law so let's go through a few questions together to show you what the court will normally look at. Now... as long as your answer to each question is "NO" then that Ford stock should still be just yours alone okay?
PAMELA: Okay.
ATTORNEY PEARSALL:: Alright, forget about that Ford Stock for this question. Are there any other stocks, pensions, annuities, 401ks or any other kind of retirement or investment accounts that either you or Jeremiah had during your marriage?
PAMELA: No. [ Pause ] So that Ford stock should still be mine so far, right?
ATTORNEY PEARSALL: So far ... but let's keep going. Does the stock pay any dividends?
PAMELA: No. It's just regular common stock in Ford.
ATTORNEY PEARSALL: Great.
Pamela: So far the stock should still be just mine, right?
ATTORNEY PEARSALL: Right. Now, did you put Jeremiah's name on the stock for any purpose at all?
PAMELA: No. My brother just died recently and we were getting divorced so I didn't do that.
ATTORNEY PEARSALL: So far so good Pam.
PAMELA: Okay.. I think I understand how this coaching works now. You take me through it step by step so I understand what I need to look at, right?
ATTORNEY PEARSALL: You've got it... but we're on a roll here so let's keep going. Did you put the stock certificates in a safe deposit box or in a place so that both you and Jeremiah have access to?
PAMELA: No. The administrator of my brother's estate still has the certificates.
ATTORNEY PEARSALL:: Okay. Did you give Jeremiah any kind of Power of Attorney or sign any document at all that gives Jeremiah any right to keep, sell, trade or do anything else with that stock either by himself or on your behalf?
PAMELA: No. Nothing.
ATTORNEY PEARSALL:: Now have you sold any of those stocks?
Pamela: No. The administrator still has them.
ATTORNEY PEARSALL: This is the last question Pam. Did you apply for or take out any loans that use that stock as security for any loan? Or did you pledge the stock as collateral for anything?
PAMELA:: No.
ATTORNEY PEARSALL: Okay. Now I need to make sure you understand something Pam. I asked you these questions because the court and particularly Jeremiah or his attorney will look for anything that shows that you commingled this stock with your marriage. If they can find something then they can argue that the court can divide it. If they don't find anything then the stock remains yours.
PAMELA: So the stock is mine, right?
ATTORNEY PEARSALL: I've asked you all the usual and major questions that would be asked to tie the stock to the marriage. Based upon what we have discussed , YES... I just want you to be aware that if there is something obscure even a small thing that we have missed then the answer might change. I think we did a good job though. Is there anything else you can think of that relates to your marriage or Jeremiah and the Ford Stock that you haven't mentioned?
PAMELA: No. So does that mean that I shouldn't give Jeremiah half of the stock because the law says so?
ATTORNEY PEARSALL: Actually, it means that Jeremiah probably doesn't have a legal right to those stocks at all. However, it's really up to you what you decide to do with the stocks and whether you give any to Jeremiah.
What you did with me here is very important. You looked at the stocks with me step by step and now you know that Jeremiah probably can't touch them even though he is trying to make a convincing argument because the law says they should be yours.
PAMELA: I am glad I made this appointment.
ATTORNEY PEARSALL: Best of all, you did the analysis with me by going through the questions and you know that if Jeremiah comes up with an argument that doesn't tie the stock to your marriage in some way, then it isn't an argument that gives him a right to part of those stocks.
PAMELA: Thanks Chris. This has been very educational.
ATTORNEY PEARSALL:: That's what I'm here for Pam. I coach you through your issues but you're the real expert in the end because no one knows your life better than you.
PAMELA: And its my decision as to what I want to do with the stock?
ATTORNEY PEARSALL: You can agree to give Jeremiah some of them or you can take the position that legally they are yours and he is not entitled to any of them. That's up to you Pam. But now you know the stocks should be yours and what the test is for your husband to have any legal claim to them.
PAMELA: That's great. This worked out better than I thought Chris. Thanks. It was nice meeting you. Here's a check for our session.
ATTORNEY PEARSALL: Thank you. It has been my pleasure to serve you Pam. That's what I'm here for. Call me again if you need any more coaching.
General Rule: Items inherited solely by either party are not part of the marital estate and are the property of the individual who inherited them and are not subject to division by the Rhode Island Family Court.
General Exception: If the person who inherited an item commingles (mixes) that item in with marital property that IS subject to division, then the court may find that the inherited item has lost its "inherited character" and has become a marital asset of both parties which is subject to the court's power of division.