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No presumption that debt is marital in equitable distribution

When arriving at an equitable distribution of a couple’s property, it’s only logical to start with the presumption that assets and debts acquired or incurred during the marriage are marital rather than individual, right?

Logical perhaps, but the Supreme Court of Virginia says today that Virginia Code § 20-107.3 creates the presumption that assets are marital but says nothing about debt. That means the party that wants to establish that a debt is the responsibility of the other party rather than marital debt has the burden of proving it.

The issue arose from a marriage in which the husband started his own business and ran up a bill of more than $100,000 because he didn’t pay federal trust fund taxes.

The trial court and Virginia Court of Appeals presumed that the wife had benefited from the money that should have gone to pay the taxes so that the obligation was marital debt.

Reversing on that point in Gilliam v. McGrady, the Supreme Court sent the case back to the trial court for application of the factors in Code § 20-107.3(E) “to arrive at a fair and equitable monetary award” under “traditional rules concerning the allocation of the burden of proof” rather than any presumption on debt that could be inferred from the equitable distribution statute.

By Alan Cooper

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