Marital or Separate Property? A Massachusetts Case Study
Stacy, Kathy v. Stacy, Barry 97 Mass. App. Ct. 160
By Jake Amoroso, CPA, Senior, Advisory Services
In 1982, Kathy and Barry Stacy were married. Before the marriage, Barry was on active duty with the United States Navy from 1960 to 1964. During Barry’s time with the Navy, he suffered a facial injury resulting in a 10% disability rating from Veterans Affairs (VA). After receiving the 10% disability diagnosis in 2004, Barry was awarded VA disabilities totaling $130 per month. In July 2015, the VA reassessed Barry’s disability rating of 10% and increased it to 30% disability with one qualified dependent, Kathy. The following July of 2016, Barry received a retroactive lump sum payment of $119,403.96. The following August of 2017, Barry received his final retroactive lump sum payment from the VA totaling $12,792.62. The presiding issue in the marital dissolution action becomes whether these VA funds are properly characterized as marital or separate property.
From 2004 through June 2014, the deposits from the VA were traced into the Parties’ joint bank account; however, all payments post-June of 2014 were deposited into Barry’s personal bank account. In June 2017, Kathy initiated divorce proceedings, with a trial held in March of 2018. The judge concluded that the VA funds deposited into Barry’s personal bank account from July of 2014 are marital property and subject to equitable distribution under Massachusetts law.1 The judge ordered those funds to be divided equally between the Parties, thus leading to an appeal from Barry.
The appeal filed by Barry argued that the funds from the VA disability rating are separate property. The Anti-Attachment statute ensures that the intended beneficiary actually receives veterans’ disability funds. To quantify how much of the VA funds have been deposited into these accounts, a financial expert would be the best resource to summarize this data. There has been a plethora of United States Supreme Court decisions on whether to include these benefits in the marital estate, and therefore, the Appellate court ordered that the VA funds deposited into Barry’s personal bank account be exempt from the division of marital assets, overturning the original ruling, and classifying such proceeds as separate.
The engagement of a financial expert and the performance of a tracing analysis to account for all of the funds received and the accounts to which such funds were deposited was a central component of this matter. The forensic analysis by the financial expert provided a summary and exhibits which assisted the trier of fact in reaching such conclusions. The engagement of such an expert from the outset of such a case can mean the difference between outcomes at trial.
- G. L. c. 208 Section 34