The Line of Demarcation
September 26, 2016 § Leave a comment
We have talked here many times about what I call the “Valuation Date,” and which the appellate courts call the “Demarcation Date.” It’s the date in the course of a divorce when marital asset value ceases to accrue, and the value becomes separate.
Although the method of pinning down the demarcation date has veered around through the years, the current state of affairs is that it can be any date from separation through the date of the divorce judgment, within the discretion of the chancellor.
It’s good to be reminded of that from time to time, and the recent COA case, Randolph v. Randolph, decided September 6, 2016, not only is a nice reminder, it also includes a recap of the law on the point.
At the trial level, Betty and Daniel Randolph had entered into a consent to divorce and left it up to the judge to decide equitable distribution. In doing so, the chancellor set the demarcation date at the date of separation. Betty appealed, contending that the date adversely affected her share of the equitable distribution. Judge Fair wrote for the unanimous court:
¶9. “The law in Mississippi is that the date on which assets cease to be marital and
become separate assets — what we refer to . . . as the point of demarcation — can be ‘either the date of separation (at the earliest) or the date of divorce (at the latest).’” Collins v. Collins, 112 So. 3d 428, 431-32 (¶9) (Miss. 2013) (quoting Lowrey v. Lowrey, 25 So. 3d 274, 285 (¶27) (Miss. 2009)). A chancellor may consider a temporary order as the line of demarcation between marital and separate property. Id. (citation omitted) (citing Cuccia v. Cuccia, 90 So. 3d 1228, 1233 (¶8) (Miss. 2012)). Ultimately, however, the chancellor has the discretion to draw the line of demarcation. Id. at (¶10) (overruling Pittman v. Pittman, 791 So. 2d 857 (Miss. Ct. App. 2001), on its implication that temporary orders always provide the mark for demarcation).
¶10. The beginning date in calculating the accumulation of marital assets is December 10, 1995—the date of Danny and Rebecca’s marriage. The chancellor found the point of
demarcation was November 28, 2011—the approximate day Danny and Rebecca separated. During the divorce proceedings, no temporary order was entered. In Aron v. Aron, this Court stated that the chancellor “has discretion in determining whether acquisitions made in a marriage’s dying stages qualify as marital or separate property.” Aron v. Aron, 832 So. 2d 1257, 1259 (¶8) (Miss. Ct. App. 2002). Here, the chancellor reasoned that neither party provided any monetary support to the other post-separation, except the disability benefits paid on behalf of Emely. We find the chancellor was well within his discretion to use the couple’s separation as the point of demarcation.
- Be sure to have your client testify as to what demarcation date should be assigned to each asset and why. This will have two positive effects: first, it gives the chancellor some evidentiary basis for the exercise of discretion; and second, it gives you something to argue on appeal if things turn out not to suit your client. Too often, we chancellors have nothing in the record other than our own judgment on which to base such a decision. If you don’t put it in the record, you can’t complain about it.
- The demarcation date can have a drastic effect on the equitable distribution because the value of the asset used is as of the demarcation date. When the judge selects a particular date, he is not only saying that the accumulation of marital value is cut off as of then, he is also saying that the asset’s value is what it was on that date. Think about how retirement funds can fluctuate from day to day. It is a great benefit to your client if you can persuade the judge to select a date favorable to her.
- Remember that the trial court is not bound to select a single, omnibus demarcation date to be applied to all assets. The court can select one date for the 401(k), another for the equity in the marital home, and yet another for the securities account. Sometimes that is the only practical, reasonable approach when the 401(k) statements end at one date, the home appraisal is another date, and the securities account statements end at yet another.