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1. Property acquired by gift, devise, or descent;

2. Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;

3. Property acquired by a spouse after a decree of legal separation;

4. Property excluded by valid written agreement of the parties; and

5. The increase in value of property acquired prior to the marriage or pursuant to subdivisions (1) to (4) of this subsection, unless marital assets including labor, have contributed to such increases and then only to the extent of such contributions.

MO. REV. STAT. §452.330.2 (1986).

A decree which fails to set apart separate property and marital property is not final for appeal. Wagner v. Wagner, 823 S.W.2d 523 (Mo. App., W.D. 1992); Zimmer v. Zimmer, 826 S.W.2d 904 (Mo. App., S.D. 1992). Therefore, the first task for the court (and for the practitioner presenting his case to the court) is to identify nonmarital property and isolate it from the marital estate.

A. SEPARATE PROPERTY

1. Property acquired by gift, devise, bequest or descent:

All property acquired separately by gift is nonmarital. This includes property gifted by one of the parties to the other during the marriage, and applies even if the gift was acquired with marital funds. For example, anniversary gifts given to a wife by a husband during their marriage are considered the wife's nonmarital property. Townsend v. Townsend, 705 S.W.2d 595 (Mo. App. E.D. 1986); See also Heineman v. Heineman, 768 S.W.2d 130 (Mo. App. W.D. 1989). Obviously, then, an engagement ring given in contemplation of marriage becomes the nonmarital property of the recipient (even if the marriage lasted only 16 weeks). Smith v. Smith, 797 S.W.2d 879 (Mo. App. S.D. 1990).

The elements of a "gift" in divorce cases are the same as for any other purpose, and in the event of a dispute they must be proven:

1. A present intention to make a gift on the part of the donor;

2. delivery of the property by the donor to the donee; and

3. acceptance by the donee, whose ownership takes effect immediately and absolutely.

Id.

Property gifted to one of the parties by someone outside the marriage is the separate property of the recipient, as is property acquired by inheritance. A party claiming a gift must prove the gift with clear and convincing evidence. Scism v. Scism, 844 S.W. 2d 506 (Mo. App. E.D. 1992); Heineman v. Heineman, 769 S.W. 2d 137 (Mo. App. E.D. 1989). Note that with titled property, the gift is presumed to be made to the titleholder. Once the title interest is proven, there is no need to prove the elements of gift described above. It is not for the trial court to look to the donor's motive in making the gift. In re Marriage of Johnson, 856 S.W. 2d 921 (S.D. 1993).

2. Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise or descent; Property acquired after decree of legal separation:

As with other claimed separate property, the burden is on the party claiming the separate nature of the property to prove with clear, cogent and convincing evidence that the property was acquired in the manner described. Mere conclusory testimony of one party, without corroboration, will not satisfy the required threshold of proof. Reed v. Reed, 762 S.W.2d 78 (Mo. App. S.D. 1988). Therefore, bare testimony should be considered the proof of last resort.

PRACTICE TIP: Documents are always the best evidence, and especially so for this purpose. It is suggested that in any case in which the practitioner recognizes an issue relating to the character of property, he should obtain the documents necessary to prove the following facts for each such asset:

a. the acquisition date

b. the person originally acquiring the property

c. the status of title at acquisition and at time of trial

d. the method and source of payment

e. the parties' intentions as to character

f. the use of the property g. the contributions of each party to acquisition

21 J. Cochran, Missouri Practice Family Law §5.10 (1990).

Typically, not all of the documents necessary to prove these facts will be available from the client or the opposing party. Documents which do exist are frequently within the control of the opposing party and not accessible to the client. It is also possible that neither party possesses the needed information. However, the inquiry should not stop with the parties. To satisfy the standard of proof, the attorney must expend all efforts necessary to locate and present the paper trail showing the manner in which the asset was ultimately acquired. This may involve searching title records, reviewing old tax returns, business records, or corporate minutes and resolutions. The attorney may have to review probate records to obtain copies of a relevant will or pertinent orders of distribution. It may be necessary to depose the trustee of a trust which is known to exist, obtaining a copy if the client has none.

Only in this manner can the record be clear enough to withstand the scrutiny of a trial judge who understands the marital property presumption, and to hold up on appeal given the standard of proof cited in the cases.

3. Property excluded by valid written agreement:

Written antenuptial and postnuptial agreements, if valid, provide an additional exception to the marital property presumption. The parties to a marriage may contract, either before or during the marriage, to treat property in any number of ways in the event of a divorce. So long as the agreement is valid, its terms are binding on the court which is obliged to act in accordance with them. As to the validity of such agreements in Missouri, See Estate of Youngblood v. Youngblood, 457 S.W.2d 750 (Mo. 1950); Degerinis v. Degerinis, 724 S.W.2d 717 (Mo. App., E.D. 1987); Ferry v. Ferry, 586 S.W.2d 782 (Mo. App., W.D. 1979).

PRACTICE TIP: Such agreements are frequently challenged in divorce cases on any number of grounds. Typically, questions about the validity of the agreement are not answered until the court enters its decree. However, in Gould v. Rafaeli, 822 S.W.2d 494,496 (Mo. App. E.D. 1991), a Rule 74.04 motion for partial summary judgment was used to successfully establish the validity of the agreement early in the case, long before the ultimate trial on the remaining issues. The authors can imagine the successful use of such a motion by either the challenger or defender of such an agreement in any given case. The purpose of such a motion would be to establish the parameters of the case early in the process, and avoid unnecessary expenditures to litigate an issue which could have already been judicially determined. Unfortunately, such a result cannot be guaranteed because a partial summary judgment is an interlocutory order, and therefore not subject to appeal. In Gould, the appeal challenged a partial summary judgment granted by the trial court, which determined the agreement to be valid and enforceable. The Court of Appeals affirmed. Even if the validity of the agreement remains in issue after the partial summary judgment, the advantage on appeal (as a practical matter in a bench-tried case) rests with the party who prevailed in the trial court.

4. The increase in value of property acquired prior to the marriage or pursuant to subdivisions 1 to 4 of §452.330.2 RSMo, unless marital assets including labor have contributed to such increases and then only to the extent of such contributions.

The important exception to the rule (that increases in the value of separate property remain separate) occurs when the contribution of marital efforts has caused, at least in part, the increase in value. This issue is the source of a great deal of litigation.

In Meservey v. Meservey, 841 S.W. 2d 240 (Mo. App. W.D. 1992), the Western District Court of Appeals considered the marital contributions of a farm wife to the increase in value of her husband's separate farming corporation during their 23 year marriage. Wife's proof at trial was that she took meals to field workers, fed the livestock, moved farm machinery, and located parts for repairs. The court said marital labor, effort, or services will entitle a spouse to a proportionate share of the increase in value of the other spouse's separate property "...only after comprehensive substantiation." In addition, there must be proof of: a.) a contribution of substantial services; b.) a direct correlation between those services and the increase in value; c.) the amount of the increase in value; d.) performance of the services during the marriage; and e.) proof of the value of the services, the lack of compensation, or inadequate compensation received. Id. Proof of performing services during the marriage, alone, is not sufficient to prove the contribution to the value of the separate asset and the accompanying entitlement to a share of the increase. There must be proof of the value of the services provided, and of a connection between the performance of those services and the increase in the value of the asset. In Meservey, the wife failed to show any connection between the performance of her services, the value thereof, and the resulting increase in the value of the farm's corporate stock. See also Deffenbaugh v. Deffenbaugh, 877 S.W. 2d 186 (Mo. App. E.D. 1994).

In Hoffmann v. Hoffmann, 676 S.W. 2d 817 (Mo. banc 1984) the wife contended the increase in value of her husband's stock in a separate, closely-held corporation was marital due to her husband's efforts expended during the marriage. The Supreme Court required proof of the value of the husband's services to the corporation or that he had sacrificed payment of marital funds, by way of salary or dividends, in order to increase the value of the corporation's stock. In absence of such proof, the court said "...it would require substantial speculation to conclude that the stock's value had appreciated in any amount due to the husband's forsaking marital property compensation for his services." Hoffmann v. Hoffmann, 676 S.W. 2d 817, 826 (Mo. banc 1984).

In Heineman v. Heineman, 769 S.W. 2d 130 (Mo. App. W.D. 1989), the wife owned a photographic studio before her marriage. During the marriage she took no salary from the studio corporation as an income tax saving strategy. The value of the separate corporation increased dramatically during this period, and the increase was directly traceable to the salary forbearance by the wife. The court found that the increase in the retained earnings of the corporation was derived from money which otherwise would have been paid to the wife as her salary, which would have been marital. The retained earnings were determined to be the repository of the marital contribution to the increase in value of the business, and was determined to be marital. Heineman, 769 S.W.2d 137.

PRACTICE TIP: The use of expert testimony should be considered for use in proving a reasonable level of compensation to be expected for the individual in question. There are statistical studies available to accountants and other professionals which compile national average compensation paid to officers of similarly-situated businesses, based upon size of the business and other relevant characteristics. The practitioner should also consider the use of expert testimony to prove the value of a claimed contribution to the acquisition of an asset. For example, where the contribution of carpentry services provided by one of the spouses is claimed to have increased the value of the other's separate residence, consider the testimony of a carpenter or contractor to prove the value of the work performed, or the testimony of a realtor to prove its relationship to the increase in value of the structure. However, the proponent of this contribution evidence may claim a marital interest which is limited to the value of the contributions made; there is no marital interest which attaches to an increase in the value of separate property which results from general market considerations or inflation. MO. REV. STAT. §452.330.2(5) (1988). The limitation applies only to claimed interests in the increase in value of separate property. Id. There is no corresponding limitation on the value of a claimed contribution to the acquisition of marital property, whether that contribution is from the separate funds of the proponent, or from marital funds generated by marital efforts.

B. MARITAL PROPERTY

1. Title and the Evolution of the Source of Funds Rule.

The manner of classifying "marital" and "separate" property has evolved dramatically since 1984, nine years prior to this writing. The most significant change from the prior law came with the adoption of the pure "source of funds" rule by the Missouri Supreme Court. This occurred in 1984, in Hoffmann v. Hoffmann, 676 S.W.2d 817. Under the Hoffmann source of funds rule, the character of property was determined solely by the source of funds financing its purchase. Id. at 824. The property was considered to be acquired as it was paid for, so that a portion of the property's ultimate value could be both marital and separate property. The source of funds approach embodied a theory of marital partnership. Id.

The source of funds rule allowed compensation for marital efforts and property contributed to the aquisition or enhancement of the value of the asset. Such contributions would not otherwise be reflected in the title ownership of the property. The equitable theory of the rule also gave the marital estate a proportionate share of the total appreciated value of the property, even if due only to general economic conditions and not attributable to any further marital effort or contribution. "Thus, the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each [received] a proportionate and fair return on their investment." Neal v. Neal, 776 S.W.2d 861 (Mo. App. S.D. 1989).

The acquisition of an interest in the appreciated value of separate property, by operation of the source of funds rule, is dramatically demonstrated in Herr v. Herr, 705 S.W. 2d 619 (Mo. App. S. D. 1986). In that case, the wife contended she was entitled to a "share of the appreciation in the value of the [Husband's separate] farm attributable to the period of time when the marital unit assumed the debt on the farm." Id. at 622. The court developed the following formula for determining the marital interest in the farm attributable to the contribution of marital funds used to pay down the debt:

nonmarital property = nmc/tc x e

marital property = mc/tc x e

"nmc" is the nonmarital contribution which was defined as the equity in the property at the time of marriage, plus any amount expended after marriage by either spouse from traceable nonmarital funds in the reduction of mortgage principal, and/or the value of improvements made to the property from such nonmarital funds.

"mc" is the marital contribution , which was defined as the amount expended after marriage from other than nonmarital funds in the reduction of mortgage principal, plus the value of all improvements made to the property after marriage from other than nonmarital funds.

Total contribution ("tc") was defined as the sum of nonmarital and marital contributions.

Equity ("e") was defined as the equity in the property at the time of distribution. "This may be either at the date of the decree...or, if the property has been sold prior thereto and the proceeds may be properly traced, then the date of the sale shall be the time at which the equity is computed. Id. at 625.

Using this formula, the court could determine the marital property interest in an otherwise separate asset, and more importantly, the marital interest in its appreciated value. It is this "equity" component of the formula which allows the acquisition of an interest in the appreciated value of separate property.

The Herr formula was adopted in the Eastern District in Winter v. Winter, 712 S.W. 2d 423 (Mo. App. E.D. 1986).

Note, however, that since the passage of §452.330.4 RSMo 1988, commingling alone does not create a marital interest in the appreciated value of previously separate property. Nor does commingling, alone, transmute the character of the property from separate to marital. The statute, enacted four years after the Hoffmann opinion was written, provides as follows:

"Property which would otherwise be nonmarital

property shall not become marital property solely because it may have become commingled with marital property."

Thus, since the appreciation in the value of separate property remains separate (per §452.330.2(5) RSMo 1986), it seems there can be no aquisition of a marital interest in the increase by virtue of the commingling of marital property with the separate property. This would seem especially so given the language set forth in §452.330.2(5), which limits the acquisition of a marital interest in the increase in the value of separate property to the extent of the marital contributions made. MO. REV. STAT. §452.330.2(5). The marital interest in separate property would equal the value of marital contributions proven, and no more.

Even though it might appear the Herr formula should no longer be followed, some cases have continued to apply it, and have thereby awarded to a spouse an interest in the appreciated value of the other's separate property. See Moritz v. Moritz, 844 S.W. 2d 109 (Mo. App. W.D. 1992), in which the court stated "In order to determine the marital interest in debt-free property that has been acquired by the investment of both marital and nonmarital funds, the proper formula to use is: marital contribution/total contribution x value..." See also Brooks v. Brooks, 911 S.W. 2d 631 (Mo. App. E. D. 1995). Such a formula grants an interest in the appreciated value of separate property because it is based upon the value at the time of the division. This is inconsistent with the language of §452.330.2(5) quoted above.

Prior to Hoffmann, the character of property was determined by the "inception of title" rule. The "inception of title" rule classified property as separate or marital at the moment title was taken, without regard to the origin of the funds with which the asset was acquired. The inception of title rule was patently unfair to the party who held no title interest in the asset, but contributed in some manner to its aquisition. The source of funds rule provided a means for recognition of the contribution.

Some of the impact of the source of funds rule described in Hoffmann was diluted by the Missouri legislature when it adopted §452.330.4 RSMo in 1988:

"Property which would otherwise be nonmarital property shall not become marital property solely because it may have become commingled with marital property."

The revised provision protects separate property from automatic transmutation to marital property by commingling alone. Additionally, the revised provision protects the appreciated value of separate property from being re-characterized as marital property due to commingling. However, the essence of Hoffmann appears to remain in force, to this extent: the source of funds with which an asset is acquired is now nearly as important a consideration for the court in classifying property as the status of its title.

2. Transmutation.

Property which at one time during the marriage was clearly separate may become transmuted to marital property by either a.) gifting or joint titling, or b.) commingling. Doll v. Doll, 819 S.W.2d 739 (Mo. App., E.D. 1991). It is important to remember that these concepts are not the same, and that each is treated differently under the case law and the dissolution of marriage statute. Id. at 741.

a. Transmutation by Joint Title or Gift to Marital Estate

The execution of a deed in joint names represents evidence of a donative intent to create a gift to the marital estate. This is a rebuttable presumption. Smith v. Smith, 785 S.W.2d 764 (Mo. App. E.D. 1990), citing Kramer v. Kramer, 709 S.W.2d 157 (Mo. App. E.D. 1986) and Allen v. Allen, 770 S.W.2d 529 (Mo. App. E.D. 1989). This is so even where one spouse furnished all of the consideration. Doll v. Doll, 819 S.W.2d 739 (Mo. App. E.D. 1991), citing Kramer, supra, and Dunsford v Dunsford, 671 S.W.2d 282, 283 (Mo. App. E.D. 1983). The cases make it quite clear that only the clearest possible evidence that no gift to the estate was intended may rebut the presumption. The "clear and convincing" standard refers to evidence which "...instantly tilts the scales in the affirmative when weighed against the evidence in opposition, and the fact-finder's mind is left with an abiding conviction that the evidence is true." In re Jennings, 910 S.W. 2d 760 (Mo. App. S.D. 1995). Mere self-serving testimony that there was no intent to make a marital gift is entitled to littleweight. Absher v. Absher, 841 S.W. 2d 293 (Mo. App. E.D. 1992); Stephens v. Stephens, 842 S.W. 2d 909 ( Mo. App. E.D. 1992).

Even where substantial evidence exists that a primary purpose apart from the creation of a gift to the estate motivated the change in title, the Missouri courts have determined that donative intent to create a marital gift was presumed to exist concurrently therewith. McDonough v. McDonough, 762 S.W.2d 827 (Mo. App., E.D. 1988).

b. Transmutation by Commingling

At one time, any commingling of marital property with separate property transmuted the entire corpus to marital property. For example, in Cartwright v. Cartwright, 707 S.W. 2d 469 (Mo. App. E.D. 1986) the court held that when interest earned on a separate certificate of deposit during the marriage is commingled with the separate principal, the entire fund became transmuted to marital property. In 1988 the Missouri General Assembly amended §452.330 by adding a new paragraph 4 as follows:

Property which would otherwise be nonmarital property shall not become marital property solely because it may have become commingled with marital property.

MO. REV. STAT. § 452.330.4 (Supp. 1990).

The effect of the amendment was to protect separate property from inadvertent transmutation such as in the Cartwright case. If Cartwright were decided under the 1988 amendment, the separate certificate of deposit would remain separate, despite the commingling of the interest earned thereon during the marriage.

However, the 1988 amendment did not alter the effect of joint titling of property, which property continues to be presumptively marital. Doll, 819 S.W.2d at 741.

PRACTICE TIP: The attorney representing a party who claims he did not intend to contribute separate property (which became jointly titled) to the marital estate should concentrate on proving his contribution to the acquisition of the asset, rather than attempting to rebut the marital presumption as to the marital nature of the jointly-titled property. By arguing contribution, the attorney may still be able to recoup a substantial percentage of the client's separate funds in the division of property, despite its marital nature. This valuable argument will be addressed more fully in Section III (2) of this chapter, below.

III. Considerations for Disposition of Property

§452.330 RSMo describes the factors for the court to consider in dividing the marital estate. Under the statute, the court is to divide the marital property in such proportions as the court deems just after considering all relevant factors, including:

(1) The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children;

(2) The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;

(3) The value of the nonmarital property set apart to each spouse;

(4) The conduct of the parties during the marriage; and

(5) Custodial arrangements for minor children.

MO. REV. STAT. § 452.330.1(1)-(5) (Supp. 1991).

It should be noted that the statute does not provide for an equal division of the marital estate; the division need only be equitable given the considerations enumerated above. Dove v. Dove, 773 S.W.2d 871 (Mo. App. W.D. 1989). It is this distinction which prevents the Missouri dissolution of marriage statute from being a true "no-fault" statute. Rather, we have a "modified" no-fault statute: the conduct of the parties may bear upon the division of their marital property at divorce. See J. Goldner, Missouri Dissolution of Marriage, Support, and Child Custody at §6.1, Harrison Company (1987).

As will be seen, the cases impact heavily upon the statute, alternately expanding and restricting its terms, and further defining its language.

1. Economic circumstances of the parties.

In Mika v. Mika, 728 S.W. 2d 280 (Mo. App. E.D. 1987) the Eastern District Court of Appeals examined economic circumstances and upheld a property division of roughly 84% to the wife and 16% to the husband. In Mika, the husband earned $121,000 per year and the wife stopped working shortly after the marriage at his request. She was also unemployed at the time of the divorce. An additional economic factor considered by the court in upholding the trial court's decree was the balance between income-producing and non-income-producing property. The Court approved the award of a cash payment to the wife to compensate her for the fact that the 16% of the property awarded to the husband was income-producing. Such a cash payment "need not be linked to any particular asset" in that circumstance. Mika v. Mika, 728 S.W.2d 280, 284 (Mo. App. E.D. 1987).

In Rudden v. Rudden, 765 S.W. 2d 719 (Mo. App. E.D. 1989), the Eastern District Court of Appeals stated social security benefits or potential benefits are economic factors to be considered, along with other factors, in the disposition of the marital property. Rudden v. Rudden, 765 S.W.2d 719, 720 (Mo. App., E.D. 1989). This was held to be so even though such benefits are not assignable as marital or separate property within the context of a divorce. But cf. MO. REV. STAT. § 169.572.1 (Supp. 1991). (This does not mean such benefits are considered property for purposes of divorce, because in fact they are not). Based upon this statute and its mandate to consider the parties' respective economic circumstances, other cases have awarded the marital residence to the custodial parent. See Mueller v. Mueller, 782 S.W.2d 445 (Mo. App. E.D. 1990); S.E.G. v. R.A.G., 735 S.W.2d 164 (Mo. App. 1987). Once the Court has awarded to the custodial parent the right to remain in the marital residence, that right may not be conditioned upon whether the spouse remarries or cohabitates with another person. Bixler v. Bixler, 810 S.W.2d 95 (Mo. App. E.D. 1991).

2. Contribution to the acquisition of the marital property.

The court may award a greater percentage of the marital property to the party who contributed more to its acquisition. Although this factor refers generally to the parties' respective conduct and contributions of services and funds during the marriage, it is especially important where the client committed substantial separate funds or assets to the marital estate which ultimately became jointly titled. As indicated in Section II, above, the heavy presumption of donative intent for jointly-titled property will be nearly impossible to rebut. However, the contribution argument presents an alternative theory to obtain reimbursement to the client.

For example, in Ryall v. Byrd, 903 S.W. 2d 683 ( Mo. App. E.D. 1995) the court approved a 90% to 10% division of property in a fifteen month marriage where one party contributed all the assets and earnings of the parties in that fifteen month period.

In Abrams v. Abrams, 787 S.W. 2d 902 (Mo. App. E.D. 1990), the court awarded $12,000 of the marital equity interest in the marital home to the wife and $2,000 of that interest to the husband. There was evidence the wife used a $10,000 inheritance to purchase the property for the couple.

In Whaley v. Whaley, 805 S.W. 2d 681 (Mo. App. E.D. 1990) the trial court awarded 65% of the estate to the husband and 35% to the wife. The appeals court affirmed the division because the marriage was relatively short--7 years--and most of the marital property was acquired with funds the husband brought into the marriage. Wife brought no assets into the marriage.

PRACTICE TIP: This contribution argument should also be made where one of the parties contributed substantial premarital funds to the use of the marital entity. Even though the funds were exhausted by the time of the divorce, the parties may have enjoyed a higher standard of living during their marriage than they might otherwise have experienced. The contributing party may be entitled to a disproportionate share of the remaining estate.

It should be noted, however, that the significance of a greater financial contribution by one spouse as a factor for division of the estate diminishes over time. Hash v. Hash, 838 S.W.2d 455 (Mo. App. S.D. 1992). Therefore, it would seem that the longer the marriage, the less significant the greater financial contribution as a factor in the division, and the more likely the contribution will be considered a gift to the estate.

3. Value of the nonmarital property awarded each party.

There are few cases in which this factor was held to be dispositive on the issue of property division. However, it has been held that the court should not deduct, dollar-for-dollar, from the share of marital property to be awarded based upon the separate property awarded to that party; the court is merely to consider it, and there is no elaboration in the cases as to the extent and manner of such consideration. Smith v. Smith, 702 S.W.2d 505 (Mo. App. S.D. 1985).

Special consideration should be given to this factor when representing a party whose spouse has substantial separate assets at his or her disposal. In that circumstance, the value of the adverse party's separate estate may militate in favor of a disproportionate division of the marital estate which favors your client.

4. The conduct of the parties during the marriage.

Conduct of the parties is frequently cited as the reason for a particular disposition of the marital property in the cases. The types of conduct to be considered are many, and have included physical abuse and telephone harassment, Divine v. Divine, 752 S.W.2d 76 (Mo. App., S.D. 1988), alcohol abuse and concealment of assets, Clark v. Clark, 801 S.W.2d 496 (Mo. App., E.D. 1990), and the dissipation of marital funds. Gourley v. Gourley, 811 S.W.2d 13 (Mo. App., S.D. 1991) ; Hogrebe v. Hogrebe, 727 S.W.2d 193 (Mo. App., E.D. 1987). Of course, there are many cases in which sexual misconduct and adultery were dispositive factors.

Frequently there is a claim of misconduct as relates to infidelity. The statute makes no distinction between misconduct which occurs before and after the separation, and presumably all such misconduct is technically relevant. In many cases the claimed infidelity occurs at or near the time of separation from the spouse, making the distinction between pre- and post- separation misconduct even more relevant when representing the party who desires to raise the claim of misconduct. The cases say, however, that post-separation misconduct may be relevant only when it places additional burdens upon the marriage, financially or otherwise. Mika v. Mika, 728 S.W.2d 280 (Mo. App. E.D. 1987). See also Dardick v. Dardick, 670 S.W.2d 865, 870 (Mo. 1984).

Since post-separation misconduct is often considered irrelevant by the Court, it may be difficult to draw the Court's attention to such conduct unless it is especially egregious or injurious. Therefore, when representing the spouse who wishes to raise the issue, consideration should be given to discovery of monies and assets expended by the bad actor which inured to the benefit of his or her paramour. Such financial expenditures clearly demonstrate a financial burden upon the marital estate. They may also make post-separation misconduct (which might otherwise be deemed irrelevant) entirely relevant for trial.

When representing the "bad actor" spouse, such an approach by opposing counsel may only be prevented by an agreement to provide an accounting of such expenditures without the need for formal discovery by him or her. While such an agreement does not eliminate the issue, the issue can frequently be defused and its volatility controlled. It also makes the issue less intimidating to the client, who should make settlement decisions based upon rational factors rather than upon fear of some unknown sanction for his or her judgment.

5. Custodial arrangements for the minor children.

This factor first appeared in the statute in 1988 as new subparagraph 5 of §452.330.1 RSMo. The first case in which the amendment appears to have been relied upon to support a disproportionate division of property in favor of a custodial parent was the Southern District case of Howerton v. Howerton 796 S.W.2d 665 (Mo. App. S.D. 1990). In Howerton, the court of appeals adjusted the division of property on appeal by awarding the custodial parent an additional $10,000 in marital property, payable in one hundred equal monthly installments of $100 each until paid. The stated rationale for adjusting the property award in this manner was the need to protect the financial maintenance of the minor children, as well as to apply §452.330.1(5), which had just been added to the statute. Such an award reflects an appropriate reluctance to uproot the custodial parent and child by requiring its sale. Vehlewald v. Vehlewald, 853 S.W. 2d 944 (Mo. App. E.D. 1993).

IV. Treatment of Particular Property or Circumstances

1. Dividends and stock splits.

Cash dividends earned during the marriage on separate property are considered income during the marriage and are therefore marital. Drikow v. Drikow, 803 S.W.2d 122 (Mo. App. E.D. 1990). However, additional stock acquired because of a split of or dividend on separate stock remains separate property. The rationale is the split does not represent an increase of property owned before the marriage; rather, it is merely a greater number of shares which represent exactly the same ownership and value as existed prior to the stock split or stock dividend. Bruske v. Bruske, 656 S.W.2d 288 (Mo. App. W.D. 1983).

2. Marital debts.

The determination of who will be responsible for debts incurred during the marriage is a factor the trial court is to consider in seeking a fair division of marital property.

Whitworth v. Whitworth, 806 S.W.2d 145 (Mo. App. W.D. 1991); Levis v. Levis, 713 S.W.2d 561 (Mo. App. E.D. 1986). However, debts incurred during the marriage are not marital property and the trial court is under no obligation to distribute them. Harper v. Harper, 764 S.W.2d 480 (Mo. App. E.D. 1989). The failure to distribute responsibility for payment of marital debts within the decree does not prevent its finality. Fiorani v. Fiorani, 720 S.W.2d 438 (Mo. App. W.D. 1986). However, in Oldfield v. Oldfield,

688 S.W.2d 778 (Mo. App. E.D. 1985). it was held the trial court abused its discretion by failing to consider liens against the Husband's corporations and other marital debts in valuing the marital estate, resulting in an unfair division of property. The decree was modified on appeal to rectify the inequitable division. Oldfield, 688 S.W.2d at 782.

3. Military pensions.

These are divisible, even when not fully vested. In Fairchild v. Fairchild, the parties were married for thirteen years. Husband had been in the service for fifteen years, and would become entitled to receive payments from his pension after twenty years' service. The court held his wife was entitled to 1/2 of 13/20ths of any such retirement pay which may become payable to the Husband. "The fact that entitlement to retirement benefits depend upon contingencies and by their nature are speculative- both as to future entitlement thereto, and as to amounts- does not deprive them of their character as marital property." Id.

4. Missouri State Teachers' Retirement pensions.

A court of competent jurisdiction may divide the pension, annuity, benefits, rights, and retirement allowance provided pursuant to the Missouri teacher and school employee retirement system between the parties to any action for dissolution of marriage, to the same extent and in the same manner the court may divide any federal old-age, survivors or disability insurance benefit of the parties provided pursuant to the federal Social

Security Act. MO. REV. STAT. § 169.572 (Supp.1991). However, subparagraph 1 of the referenced section states that no court shall divide or set aside any federal old-age, survivors or disability insurance benefit provided pursuant to the Social Security Act in any proceeding for dissolution of marriage. The effect of this statute is that such state teachers' pensions are the separate property of the teacher, and to divide them is reversible error. Gismegian v. Gismegian, 849 S.W. 2d 201 (E.D. Mo. 1993).

5. Disability benefits and workers' compensation awards.

Disability insurance benefits are considered substitutes for lost earnings occasioned by an inability to work, and therefore the same as postdissolution earnings. As a result, they are non-marital property under §452.330.2(3) RSMo. Sherman v. Sherman, 740 S.W.2d 203 (Mo. App. W.D. 1987). A lump sum award of workers' compensation benefits, including an award prior to dissolution, is nonmarital to the extent the award compensated the recipient for future loss of earnings that had accrued since the dissolution of the marriage. Pauley v. Pauley, 771 S.W.2d 105 (Mo. App. E.D. 1989).

6. Professional degrees.

Professional degrees, per se, are not considered property subject the dissolution of marriage act. Roark v. Roark, 694 S.W.2d 912 (Mo. App. E.D. 1985). Nor do the cases consider there is an increase in "human capital" attributable to the acquisition of a professional degree or of board certification in a medical specialty which can be ascribed to have a value and be considered as an asset in the division of property. Riaz v. Riaz, 789 S.W.2d 224 (Mo. App. E.D. 1990). However, the contribution of one spouse to the aquisition of such a degree by the other spouse may indeed be considered in dividing property as well as in awarding maintenance. Studyvin v. Studyvin, 779 S.W.2d 338 (Mo. App. S.D. 1989); Dusing v. Dusing, 654 S.W.2d 938 (Mo. App. S.D. 1983); Lowrey v. Lowrey, 633 S.W. 2d 157 (Mo. App. W.D. 1982).

PRACTICE TIP: Always present evidence on the non-professional spouse's contribution, if any, to the acquisition of a professional degree by the other spouse. Such evidence is frequently persuasive to the court, especially when the parties are young and have accumulated little in the way of property to divide.

7. Personal injury claims and proceeds.

An unliquidated claim for damages arising from personal injury during the marriage is marital property for purposes of the dissolution of marriage proceeding. Jobe v. Jobe, 708 S.W. 2d 322 (Mo.App. S.D. 1989). The proceeds of a personal injury settlement received by one of the parties during the marriage are marital, Zimmer v. Zimmer, 770 S.W. 2d 514 (Mo. App., W.D. 1989) (annuity settlement); Nixon v.Nixon, 525 S.W. 2d 835 (Mo. App., E.D. 1975)(lump sum settlement proceeds); including proceeds from actions under "FELA," the Federal Employers' Liability Act (45 U.S.C. Sections 51 et seq.). Gonzalez v. Gonzalez, 689 S.W. 2d 383 (Mo. App. E.D. 1985).

8. Insurance Premium Renewals.

In a Western District case, a State Farm agent was allowed to keep his renewals earned during the marriage as part of his share of the marital estate. The renewals, though speculative in amount, were denominated as marital property by the court. Whitworth v. Whitworth, 806 S.W. 2d 145 (Mo. App. W.D. 1991).

9. Capital Loss Carryovers.

In Mills v. Mills, 663 S.W. 2d 369 (Mo. App. E.D. 1983). the court determined a capital loss carryover under I.R.C. §1212 was marital property and allocated it as between the parties. See discussion of this issue at Section V(3) of this Chapter, infra.

10. Inchoate Interests

The term "property" in §452.330 includes inchoate interests. Claunch v. Claunch, 525 S.W. 2d 788 (M0. App. 1975). Inchoate interests acquired prior to marriage are separate even though the acquisition of the asset is not perfected until after the marriage takes place. Null v. Null, 608 S.W. 2d 568 (Mo. App. S.D. 1980). The ultimate acquisition of legal title after the marriage relates back to the time the inchoate right was initially acquired. Id., 608 S.W. 2d 568, 570 (Mo. App. S.D. 1980).

11. Dissipation or wasting of assets.

If there is evidence that one spouse squandered marital properties, the trial court may order reimbursement in the dissolution proceeding. Layton v. Layton, 687 S.W.2d 214 (Mo. App., W.D. 1985), citing Calia v. Calia, 624 S.W.2d 870 (Mo. App., W.D. 1981). See also Schneider v. Schneider, 824 S.W.2d 942 (Mo. App. E.D. 1992). For example, where the marital residence is foreclosed upon and one of the spouses has the means to prevent the foreclosure and ultimate loss of equity in the asset, the court may charge the offending party with the loss in the property division. Heins v. Heins, 783 S.W.2d 481 (Mo. App. W.D. 1990). In this vein, a Pennsylvania court has held the husband dissipated marital assets to the extent there was increased income tax liability caused by his refusal to file a joint federal tax return with his wife for no good reason. Gruver v. Gruver, 539 A.2d 395 (Pa. Super. Ct. 1988).

12. Concealment of assets.

Punitive damages were awarded a plaintiff who discovered, after the divorce, that her spouse had intentionally concealed property during the proceedings. Burris v. Burris, 904 S.W. 2d 564 (W.D. 1995).

A Michigan case allowed for the divesting of all property a spouse attempted to conceal at the time of the divorce, and awarded it to the innocent spouse before dividing the remaining property. Sands v. Sands, 482 N.W.2d 203 (Mich. App. 1992). "Once a spouse intentionally has misled the court or the opposing spouse regarding the existence of the asset, that spouse should be estopped from receiving any part of the property." Id.

PRACTICE TIP: When representing the non-moneyed spouse, it behooves the attorney to test the parties' cash flow for several years prior to the proceeding, up to and including the time of the trial. By examining the cash flow experienced by the parties, the attorney can determine whether all income and assets have been accounted for. The cash flow examination is conducted by preparing a spread sheet which lists each and every infusion of cash to the parties during the period in question. Cash infusions relevant to this purpose include income from employment, proceeds realized from the sale of assets, loans taken out from banks or from the parties' closely held or professional corporation, income tax refunds paid to the parties, and the like. After accounting for all cash coming in to the marriage during the relevant period, all known expenditures are deducted. Most of these are obtained from the parties' tax returns or the adverse party's statement of income and expenses. Such expenditures might include, but not be limited to federal, state and city income taxes paid; social security tax and other deductions from payroll; the monthly expenses sworn to on the affidavit of income and expenses; IRA or profit sharing contributions made; investments known to have been purchased during the relevant period; and any existing PDL or other known support payments being made.

The excess of cash received over known expenditures may indicate the existence of an undisclosed asset such as a bank account or other investment. By studying the parties' cash flow, the attorney puts the burden on the moneyed spouse to account for the missing funds at trial. If the funds cannot be accounted for, the court may consider crediting them to the marital estate in the division of property and awarding them to the party unable to account for their whereabouts. Cash flow studies are a powerful tool for both trial and settlement negotiations.

13. Ownership interest of third parties/joinder.

Where third parties claim an interest in marital assets, they may and should be joined in the divorce case so that the interests of all the owners are protected. Ravenscraft v. Ravenscraft, 585 S.W. 2d 270 (Mo App. W.D. 1979). Where there is no title interest, but there remains an issue as to whether a third party has an interest in property, an attempt should still be made to join the third party. However, such an order is largely discretionary with the trial court. See Stamatiou v. Stamatiou, 798 S.W.2d 737 (Mo. App. W.D. 1990). Where there is evidence that an asset titled in the name of another is in fact owned by one of the parties, one court included the asset in the estate even though the third party was not joined. Cochran v. Cochran, 716 S.W.2d 275 (Mo. App. E.D. 1986). There is another case in which the divorcing parties, while not holding title to real property held in the names of the husband's parents, were found to have the equitable ownership of the parcel on a resulting trust theory. Ham v. Ham, 691 S.W. 2d 944 (Mo. App. W.D. 1985).

14. Corporate alter ego.

The general rule is the trial court may not divide the assets of a corporation not a party to the litigation, even if the stock is owned entirely by a party. Mehra v. Mehra, 819 S.W.2d 351 (Mo. banc 1991). In such circumstances, the trial court is generally limited to disposing of the corporate stock. However, the trial court may direct a party, as sole shareholder of the corporation, to cause the corporation to transfer certain corporate property to create an equitable division of property. Id. There is other authority, however, that the court may allocate property of a corporation even if that entity has not been joined in the proceeding, if the corporation is merely the alter ego of the party before the court. Secor v. Secor, 790 S.W.2d 500 (Mo. App. E.D. 1990). See also Schlingman v. Reed, 750 S.W.2d 501 (Mo. App. W.D. 1988), in which the court ignored the corporation's separate existence by allowing a creditor to garnish corporate assets to satisfy a judgment against the debtor who owned the entire corporation:

Under the alter ego or instrumentality rule, when a corporation is really indistinct from the person controlling it, then the corporate form may be disregarded if to retain it would result in injustice...moreover, a court may, in its equitable powers, "disregard the separate legal entity of the corporation and the individual where the separateness is used as a subterfuge to defraud a creditor."

Schlingman, 750 S.W.2d 501 at 504. SEE ALSO Krajcovic v. Krajcovic, 693 S.W. 2d 884 (Mo. App. E.D. 1985)

V. Tax Consequences Incident to Property Transfers in Divorce

The tax consequences attendant to property to be divided should always be considered by the practitioner in settling the case or in preparing evidence for trial. The tax consequences of a dissolution of marriage should be taken into consideration in ordering a division of marital property. Lewis v. Lewis, 808 S.W.2d 919, 924 (Mo. App. S.D. 1991); Clark v. Clark, 801 S.W.2d 95, 99 (Mo. App. E.D. 1990). The burden is upon the party desiring the court to consider tax consequences to present evidence about them to the court. Harrison v. Harrison, 657 S.W.2d 366 (Mo. App. S.D. 1983). The court is not obligated to reach its own conclusions about tax consequences absent such evidence. Id.

While it is not necessary to become a taxation expert, it is certainly necessary to develop a general sensitivity to tax implications of divorce. Such sensitivity will alert the lawyer to subjects needing further study with accountants or other tax experts, and to items of evidence needed for trial.

Typically, taxation issues arise in the division of property in the following two areas:

a. Capital gain on the asset- To what extent has taxable gain accrued on the property to be divided and how should the attendant tax liability be allocated? If the residence is to be sold, have any previous gains been rolled into it which will be realized upon sale? Is the tax burden on the gain to be shared by the parties, or borne by only one of them? If it is to be borne by only one of them, is this by design or by default? May the gain be rolled over without recognition? The concept of fair market value contemplates a sale. Therefore, the trial court may presume a sale and its attendant tax consequences in valuing property for division. Hogan v. Hogan, 796 S.W.2d 400 (Mo. App. E.D. 1990).

b. Recapture of Depreciation or Investment Tax Credits - This is particularly important given the present bankrupt status of many real estate investment partnerships and resultant recapture of depreciation taken. Additionally, assets used primarily in business during the marriage may have been depreciated. A change in the primary use of the property after division may result in a recapture of the depreciation taken. The recipient of the asset with the recapture potential is the recipient of the tax liability.

1. Taxation of Property Transfers Between Spouses

Internal Revenue Code Section 1041 governs the taxability of property transfers and divisions between spouses incident to a divorce proceeding. No gain or loss is recoginized on a transfer of property from a spouse to a spouse, or a former spouse, but only if the transfer is incident to a divorce. I.R.C. §1041(a)(1) & (2). Section 1041 applies to all transfers between spouses, and a divorce need not be contemplated between the spouses, at the time of the transfer, for it to apply. Treas. Reg. §1.1041-1T(a) (1984). Additionally, annulments and other determinations that the marriage is void ab initio still constitute divorces for purposes of §1041 treatment. Treas. Reg. §1.1041-1T(b) (1984). A transfer is presumed to be "incident to a divorce" if the transfer occurs within one year after the marriage ends, or occurs within six years after the end of the marriage and is pursuant to a divorce instrument (as defined in §71(a) of the Internal Revenue Code). Treas. Reg. §1.1041-1T (b)(1984). §1041 is not applicable to transfers to nonresident alien spouses. I.R.C. §1041(d).

Unlike the pre-1984 law promulgated by the U.S. Supreme Court, United States v. Davis, 370 U.S. 65 (1962), neither the transferor or transferee under Section 1041 recognizes gain or loss on the transfer.

The recipient of the property receives a carryover basis in the property transferred. This means the transferee receives the same basis the transferor had in the property at the time of transfer. The carryover basis applies even if a bona fide purchase for value, and without regard to whether the basis is greater than, less than, or equal to the fair market value at the time of transfer. This can be dangerous to the recipient spouse if there is a low basis in the transferred property. Such a low basis could cause substantial liability for tax on "phantom" gain at the time the property is ultimately disposed of.

Gain or loss is only recognized upon sale of the property by the transferee spouse. Note that if the transferor client needs to use the loss realized on an asset in the same year as the transfer of the asset to the spouse is contemplated, he should consider whether the asset should be transferred to his or her spouse. The transferee receives the right to claim the loss, which transfers with the property.

The Regulations require the transferor to provide the transferee with all records sufficient to determine the adjusted basis at the time of transfer, as well as notice of the potential of investment tax credit recapture.

PRACTICE TIP: The attorney should consider including language in the separation agreement or proposed decree which imposes a contractual or decretal obligation upon the transferor to seasonably provide these records to the transferee.

2. Investment Tax Credit and Depreciation Recapture- The transferee will be subject to investment tax credit recapture upon disposition of the asset. Although these credits were repealed in 1986, there are still assets in existence upon which these credits were taken. This typically occurs where the asset is used by the tranferee for personal use, and prior to transfer the asset was used in business and depreciated, or investment tax credits were taken on it. An example is as follows:

H transfers an automobile to W. H had taken an investment tax credit on the automobile for the two years he used the vehicle for business purposes prior to its transfer to W. W's use of the vehicle is solely personal. W is subject to recapture of the investment tax credit previously taken by H.

Treas. Reg. §1.1041-1T(d)(1984).

Depreciation taken on depreciable assets will also be recaptured upon disposition by the transferee. Therefore, it is important to determine whether such assets have been depreciated before agreeing to accept them at a value which does not account for this liability. Treas. Reg. §§1.1245-1(1971) ; Treas. Reg. 1.1250-3(1984).

In certain circumstances, transfers to a third party on behalf of a spouse may qualify under Section 1041 for nonrecognition treatment by the recipient spouse. However, the recipient third party does not receive the benefit of the nonrecognition rules.

3. Nonrecognition of Gain on Sale of Principal Residence

Gain on sale of the parties' principal residence may not be recognized under certain circumstances:

a. The seller must purchase a new principal residence within a period of 2 years before to 2 years after sale, and

b. The purchase price of the new residence must equal or exceed the sale price of the prior residence. (If not, gain will be recognized to the extent of the difference). I.R.C. § 1034(a).

c. Age 55 one-time exclusion- gain of up to $125,000 is not recognized if the taxpayer so elects, even if no new home is purchased. I.R.C. §121. Be cognizant of the following limitations:

i. the election may only occur one time; if the parties are still married at the time of the election, BOTH must make the election.

ii. the house which was sold must have been the party's principal residence for 3 of the last 5 years prior to the sale.

Be especially sensitive to the existence of previous gains on assets which were rolled over into the acquisition of the asset in existence at the time of the divorce. For example, the basis may not be related to purchase price of the parties' residence if gains from the sale of previous residences were rolled into present home. IRS form 2119 from the tax returns filed in years of prior sales should provide the necessary information to document these rollovers.

It is also important to remember that the principal residence is the residence in which the person claiming the exemption resides at the time of sale. Therefore, if the client has removed himself or herself from the residence prior to the sale, he or she may be deemed as having abandoned the residence. Care should be taken in advising the client in these circumstances, and to preserve the claim to the principal residence if possible. The client should be advised to maintain his principal residence in the marital home, and any other residence should be considered temporary. The client should arrange his affairs accordingly, to preserve the right to claim principal residence.

3. Capital Loss Carryovers

In many circumstances the parties may have experienced a capital loss which exceeds the $3,000 annual amount by which such a loss may exceed capital gains. To the extent allowed, the unused capital losses exceeding this limit are carried over to later years until fully utilized. I.R.C. §1211(b).

Such a loss carryover is, for all practical purposes, an asset which should be bargained for at the time the case is negotiated. Mills v. Mills, 663 S.W. 2d 369 (Mo. App. E.D. 1983). Its importance should also be presented to the court when the case is tried. It has definite economic value to the holder of the privilege and should not be overlooked. Review Schedule D of the individual tax returns from prior years to ascertain whether such a carryover exists. If the figure $3,000 appears on the schedule, there is probably a loss carryover remaining to be used in future years.

4. Retirement plans- The recipient of the plan is the party taxed on the distributions taken therefrom. Therefore, note that a $50,000 certificate of deposit and a profit sharing plan containing $50,000 are not of equal value. The monies in the plan will be taxed upon distribution, and if the distribution occurs early there is likely to be a penalty. A trial court is entitled to take cognizance of tax liability in determining the present value of a pension or profit sharing plan. Stein v. Stein, 789 S.W.2d 87 (Mo. App. E.D. 1990). Additionally, care must be taken to see that distributions from qualified plans are rolled into a qualified tax deferred vehicle such as an IRA account within the time prescribed by law. This is because rules which, in effect, eliminated previously existing sixty-day "safe harbor" provisions regarding distributions from qualified plans, became effective January 1, 1993. The change affected distributions pursuant to qualified domestic relations orders. Pursuant to I.R.C. § 3405(c) &(d), both effective January 1, 1993, the plan administrator must withhold 20% of monies distributed from a qualified plan unless the transfer is made directly to the recipient's IRA or another qualified plan. The withholding amount is mandatory, and will result in a loss of accessibility of the funds to your client if care is not taken to avoid its occurrence. If the distribution is made to the recipient, the mandatory 20 % withholding applies. Therefore, care should be taken in drafting QDRO's to make payment directly to the recipient's IRA or qualified plan.

VI. Valuation of Property

1. Use of Experts

Expert testimony is the safest and most reliable way to prove value of an asset in divorce. Typically, there is an issue as to value of real estate. Although the owner of property may testify as to his opinion of its value, Schulte v. Schulte, 546 S.W.2d 41 (Mo. App. Springfield Dist. 1977). However, the court may give less weight to his testimony, because he is an interested party. The use of a real estate appraiser is advisable when settling or trying the case.

Experts may also be used to value business interests, professional practices, pensions, antique motor vehicles, antiques, jewelry, furniture and household goods, farm equipment, and the like.

2. Professional practices

Professional goodwill acquired during the marriage may be subject to division if it can be proven to exist. The leading case on this issue in Missouri is Hanson v. Hanson, 738 S.W.2d 429 (Mo. banc 1987). Hanson expanded to professional practices the long-held view that the goodwill of a business is property. Hanson defined goodwill in a professional setting as the value of the practice which exceeds its tangible assets and which is the result of the tendency of clients/patients to return to and recommend the practice irrespective of the reputation of the individual practitioner. Hanson, 738 S.W.2d at 434. Goodwill is property which attaches to and is dependent upon an existing business entity, rather than the reputation and skill of an individual. Id. Proof of the existence of professional goodwill must be made before a value can be ascribed to it. Parker v. Parker, 762 S.W.2d 506, 509 (Mo. App., S.D. 1988). Such proof of existence is made only where there is evidence of a recent actual sale of a similarly situated professional practice, an offer to purchase such a practice, or expert testimony and testimony of members of the subject profession as to the existence of goodwill in a similar practice in the relevant geographic and professional market. Hanson, 738 S.W.2d at 435. "Absent such evidence, one can only speculate as to the existence of goodwill. Divisions of marital property may not be based on speculation as to the very existence of the property being divided." Id.

After the existence of goodwill has been proven, evidence must be adduced as to its value. The Hanson Court expressed a strong preference for the "fair market value" approach, that being the price the practice would bring were it sold on the open, relevant market to a qualified professional. Hanson, 738 S.W.2d at 436. The court should not consider the value of a covenant not to compete in assigning a value to the professional practice, unless there is evidence the practitioner intends to cease practice. Gerard v. Gerard, 825 S.W. 2d 21 (Mo. App. W.D. 1992). However, it is important to note the court did not reject other formulae for determining value, and a careful reading of Hanson is certainly warranted should the practitioner desire to utilize another method of valuation in a given case. As to the value of goodwill for skilled artisans such as tailors and artists, see Hogan v. Hogan, 796 S.W.2d 400 (Mo. App. E.D. 1990), and Ikonomou v. Ikonomou, 776 S.W. 2d 868 (Mo. App. E.D. 1989).

3. Valuation date

The relevant valuation date for property in divorce is the date of trial. Gourley v. Gourley, 811 S.W.2d 13 (Mo. App., S.D. 1991). See also Gustin v. Gustin, 861 S.W. 2d 639 (Mo. App. W.D. 1993). The relevant valuation date for property in divorce, on remand for retrial from the court of appeals, is the date of the retrial. Rickard v. Rickard, 818 S.W.2d 711 (Mo. App. S.D. 1991). Where a marital asset is divided in an equitable proceeding brought after the dissolution decree is entered, the value of the asset is properly made as of the date the asset is finally divided, rather than the date of the decree. Sauer v. Newman, 666 S.W.2d 811 (Mo. App. E.D. 1984).

4. Manner of division

The trial court has a duty to fully dispose of the property of the parties in its decree; in the absence of unusual economic circumstances, it is error to allow title to marital property to remain vested in both parties as tenants in common. Whaley v. Whaley, 805 S.W.2d 681 (Mo. App. E.D. 1990). Similarly, a division which leaves the parties tenants in common of personal property susceptible to division in kind should be avoided. Davis v. Davis, 544 S.W.2d 259 (Mo. App., K.C.D. 1976). The rationale behind the rule is to prevent "...the unnecessary extension of disputes and ill feelings." Id. at 264. Such unusual economic circumstances may involve a decree in which one spouse is allowed to occupy the marital residence until the emancipation of a minor. Whaley, 805 S.W.2d at 682. They may also be present where there is but one substantial asset incapable of division in kind, and where neither party has the means necessary to purchase the other's interest in the asset. Glosier v. Glosier, 817 S.W.2d 580 (Mo. App. E.D. 1990).

VII. Finality of Decree as to Property Division/Undivided Property

§452.330.5 RSMo states as follows:

The court's order as it affects distribution of marital property shall be a final order not subject to modification; provided, however, that orders intended to be qualified domestic relations orders affecting pension, profit sharing and stock bonus plans pursuant to the U.S. Internal Revenue Code shall be modifiable only for the purpose of establishing or maintaining the order as a qualified domestic relations order or to revise or conform its terms so as to effectuate the expressed intent of the order.

MO. REV. STAT. § 452.330.5 (Supp. 1991)

From time to time a party will discover certain property which was not included in the marital estate at divorce. Sometimes this failure to include the property in the estate occurs through sheer inadvertence; other times it has occurred by misrepresentation or intentional nondisclosure by a party. In any event, when a judgment of the trial court distributing marital property becomes final, it may not be modified in the same case. Rather, the Missouri Supreme Court has held the sole remedy for such a situation is an independent suit in equity to divide the previously undivided property. Chrun v. Chrun, 751 S.W.2d 752 (Mo. banc 1988).

The legal statutes of limitation apply to such an equitable action, although it has not yet been determined whether the five-year or the ten-year statute applies. Doss v. Doss, 822 S.W.2d 427 (Mo. banc 1992). Prudent counsel should assume the five year statute applies and act accordingly in filing an action to fully protect the interests of the client.

VII. Conclusion

The body of law on property division changes in some manner on an almost weekly basis due to the constant issuance of opinions by the courts of appeals, and the increasing frequency with which the federal laws affect the rights of individuals in divorces. These new cases continue the evolutionary process of the law from its statutory underpinnings to its application in a variety of factual patterns and circumstances. Counsel should tread cautiously and diligently to make sure the rule being applied remains in favor.

- - Zerman & Mogerman, L.L.C.