Court rules on inclusion of inherited property in marital estates

The Court of Appeals ruled today on a case of distributing inherited property during dissolution of a marriage, stating property inherited by either party should be included in the marital estate.

In Sharren M. (Garrity) Grathwohl v. Steven T. Garrity, http://www.in.gov/judiciary/opinions/pdf/07300703mpb.pdf the Court of Appeals remanded the case back to the trial court for the purpose of requiring the trial court to include both parties’ inherited property in their marital estate, to value the properties, and to issue a new order to redistribute the marital assets accordingly.

In 2003, Sharren Grathwohl and Steven Garrity, who were married at the time, both inherited properties from their mothers. Grathwohl owned her property in Michigan as a joint tenant “with full rights as a survivor,” with her son from a previous marriage owning the other half. In 2006, Garrity filed for divorce and testified that both properties should be included in the marital estate, but set off separately to each party. Grathwohl argued her inherited property should not be included because of the joint tenancy with her son. The trial court excluded both properties when dissolving the marriage and dividing the marital estate. The court calculated the net worth of the marital estate at $277,537 and awarded approximately 49 percent to Grathwohl and 51 percent to Garrity.

Grathwohl appealed the ruling, stating the trial court erred in not including Garrity’s property in the marital estate and that Garrity had frivolously dissipated marital property prior to the divorce.

The Court of Appeals, citing Indiana Code Section 31-15-7-4(a), states it has been repeatedly held that the statute requires inclusion of all property owned in the marital estate, including inherited properties. It found the trial court erred in excluding the properties of Garrity and Grathwohl. Even though Grathwohl’s property includes joint tenancy, the court stated she had the right to enjoy the use of the Michigan property, sell it, or mortgage her interest in it, thus it is sufficient enough to render the property in the marital pot as well.

The trial court didn’t include in its decision why it excluded the inherited property in the marital estate, beyond stating it was inherited property. The Court of Appeals is unable to determine the actual total value of the marital estate or the percentages of the estate Garrity and Grathwohl received because the trial court did not assign values to the parties’ interests in the inherited properties, despite evidence being presented to support that point.

The Court of Appeals remands to the trial court to include the parties’ inherited property interests in the marital estate, to valuate those interests, and to recalculate the division of marital assets accordingly. A footnote to this point states the court cannot address Grathwohl’s claim she was entitled to a larger percentage of the estate because it doesn’t know what percentage of the marital estate she actually received.

Grathwohl also claimed in her appeal that Garrity frivolously dissipated marital assets prior to the divorce when he purchased a motorcycle, bought Conseco stock that eventually became worthless, and spent money remodeling and repairing the property he inherited from his mother. The court found that Garrity did not dissipate marital assets frivolously because Grathwohl had received half of the profits from the sale of the motorcycle; Garrity couldn’t have known that the Conseco stock would become worthless; and remodeling of a home that is considered a marital asset is not wasteful.