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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Diane M. Rush v. Ray A. Rush (12/6/2024) sp-7734
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.gov.
THE SUPREME COURT OF THE STATE OF ALASKA
DIANE M. RUSH, )
) Supreme Court No.: S-18621
Appellant, )
) Superior Court No.: 3PA-20-01606 CI
v. )
) O P I N I O N
RAY A. RUSH, )
) No. 7734 - December 6, 2024
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Palmer, John C. Cagle, Judge.
Appearances: John J. Sherman, Sherman Law Office, LLC,
Anchorage, for Appellant. Kara A. Nyquist, Nyquist Law
Group, Anchorage, for Appellee.
Before: Maassen, Chief Justice, and Borghesan, Henderson,
and Pate, Justices. [Carney, Justice, not participating.]
BORGHESAN, Justice.
INTRODUCTION
This appeal in a divorce case concerns a single issue: whether the superior
court correctly determined that funds originating from a woman's employer-provided
retirement account were marital property subject to division. The woman's retirement
account was created years before the marriage. By the time she married it held over
$60,000. The account continued to grow during the marriage. Twice during the
marriage some funds were withdrawn from the account and used on marital
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expenditures. The remaining funds were later transferred to a different financial
institution and then to the account that is the subject of this dispute.
After trial the superior court ruled that the funds in the disputed account
were marital. It found that the money in the disputed account originated from the
woman's employer-provided retirement account. Although its ruling is not entirely
clear, it appears to have reached one of two conclusions: (1) that by withdrawing some
funds for marital expenditures, the woman intended to donate the entire account to the
marriage, transmuting it into marital property; or (2) that the sums withdrawn were the
woman's premarital separate funds, leaving only marital funds in the account. Each of
these rulings amounts to legal error.
First, separate funds can be transmuted into marital property by implied
interspousal gift only if there is sufficient evidence that the spouse intended to donate
her separate funds to the marriage. When a spouse uses some separate funds for marital
expenditures, that gift is not sufficient evidence that she intended to also give the
remaining separate funds in that account to the marriage. To hold otherwise would
contravene our caselaw requiring clear evidence of donative intent. Therefore it was
error to rule that by using some funds in the retirement account for marital expenditures,
the woman intended to donate all the funds in the account to the marriage.
Second, when a retirement account consists of both premarital separate
contributions and marital contributions, and funds are withdrawn for a marital
expenditure during the marriage, the default rule (unless the parties otherwise agree) is
"first in, last out": premarital separate funds are not withdrawn until all marital funds
have been withdrawn. Therefore it was error to rule that the sums withdrawn from the
retirement account were the woman's separate premarital funds while classifying the
funds remaining in the account as marital.
Because of these legal errors we vacate and remand for further
proceedings.
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FACTS AND PROCEEDINGS
Ray and Diane Rush married in July 2003 and separated in March 2022.
When they married, Diane had a deferred compensation plan based on her employment
with the Municipality of Anchorage with a balance between $63,131.23 (the balance as
of June 30, 2003) and $67,536.80 (the balance as of September 30, 2003). After they
married, Diane continued contributing to the deferred compensation plan until 2006.
Diane made large withdrawals for marital expenses - roughly $40,000 in 2009 as a
disbursement and $75,000 in 2016 to fund construction of a shop adjacent to the marital
home. In 2018 the remaining funds were removed from the deferred compensation plan
and placed in a USAA account. In 2020 the money was moved to a Charles Schwab
IRA account. The account's value at the time of the trial was $102,100.55. The parties
disagree as to whether these funds are marital or nonmarital.
The parties engaged in mediation in March 2022. After the mediation the
parties appeared before the superior court to memorialize their agreement.1 The court
described the parties having reached agreement "to allocate the assets and debts of the
marriage with one exception and two provisos." One of the provisos related to the
disputed account. The court described the key proviso as requiring Diane to provide
"additional information to provide what happened with the Charles Schwab IRA . . . to
confirm that, in fact, the marital portion of that plan - that account has already been
spent."
The parties then described their understanding of what that proviso meant.
Diane's counsel stated on the record that he understood the proviso to mean that once
Diane provided information to show that approximately $75,000 was withdrawn from
the deferred compensation account in 2016, it would be confirmed that the marital
portion of the account had been spent. Ray's counsel attempted to clarify the meaning
1 The mediation did not yield a written agreement.
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of the proviso by asking Diane if she agreed "to provide documentation to show that
the portions that were transferred out of the Municipality Deferred Comp went into the
Charles Schwab account?" Diane agreed. Ray's counsel followed by asking, "You're
going to show documentation that any of the remaining funds in the [account] are
nonmarital?" Diane agreed. Diane's counsel asserted that this documentation had
already been provided, but Ray's counsel disagreed. Diane's counsel stated: "We'll
get you another copy, you got it already," and the settlement hearing ended.
The day after the settlement hearing, Diane's counsel provided Ray's
counsel with statements confirming the 2016 withdrawals from the deferred
compensation account. Ray's counsel responded that she required statements from the
time the account was opened until the date of trial. Ray's counsel later articulated an
understanding that the mediation proviso was not a conditional agreement that the
account was nonmarital, but rather an agreement to provide documentation.
Between the mediation and the trial, counsel exchanged several letters that
showed conflicting interpretations of the proviso. Diane's counsel asserted the proviso
had been satisfied, so the disputed account should be considered Diane's separate
property per the mediated settlement agreement. Ray's counsel responded, "It remains
our position that the funds contained in this account are marital and should be divided
accordingly by the court." Diane's counsel characterized this response as an attempt to
modify the settlement agreement. Ray's counsel responded that they had never agreed
the disputed account would be deemed nonmarital.
The parties discussed the status of the disputed account in their trial briefs.
Ray argued that the account was a marital asset because Diane had not shown any
evidence that the account was funded with nonmarital money. Diane argued that
despite obvious disagreement over the meaning of the proviso, the parties had agreed
that the account would be nonmarital property.
At trial Diane argued that "the question for the court is to determine what,
if anything, of that account is marital." Neither party provided expert testimony to trace
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the funds in the disputed account to their source or to calculate the ratio of separate and
marital funds in the account. Evidence showed that $40,000 was withdrawn from the
deferred compensation account in 2009 as a disbursement and that $75,000 was
withdrawn in 2016 to fund construction of a shop on their property. Ray argued that
these withdrawals eliminated the nonmarital portion of the account. Diane argued that
they eliminated the marital portion of the account. The court stated that it would trace
the funds to determine the account's status. During closing argument Diane reiterated
her understanding of the mediation agreement as conditionally designating the account
as a separate asset.
The superior court ruled that the funds in the disputed account were
entirely marital and subject to equitable division:
Charles Schwab IRA (81). This money originated from
Ms. Rush's deferred compensation plan. She removed the
amount from deferred comp and placed [it] into USAA, then
into Charles Schwab. Ms. Rush used funds from this
account to pay for marital expenses, including paying for the
shop on the property. She claims that since there was a
$63,131.23 pre-marital balance, she should have that amount
designated as non-marital despite the fact that she withdrew
close to that during the marriage to pay for marital expenses.
At the date of trial, the total value of this account was
$102,100.55. Her argument is not well founded and the
court finds that her intent at the time the withdrawals were
made was to donate to the marital entity. This is awarded to
Ms. Rush in the amount of $102,100.55.
Diane appeals the superior court's ruling. She argues that the superior
court erred by failing to uphold the parties' mediation agreement and by classifying the
disputed account as marital property.
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STANDARD OF REVIEW
"We review questions regarding a trial court's response to a motion to
enforce a settlement under the abuse of discretion standard."2 Determinations of the
parties' intent are factual findings, based on the "surrounding facts and circumstances
3 4
in each case." We review those findings for clear error.
"The characterization of property as separate or marital may involve both
legal and factual questions."5 We review "[u]nderlying factual findings as to the
parties' intent, actions, and contributions to the marital estate" for clear error.6 "[B]ut
whether the trial court applied the correct legal rule . . . is a question of law that we
7
review de novo using our independent judgment."
DISCUSSION
A. The Mediation Agreement Did Not Resolve The Account's
Classification Because The Parties Did Not Reach A Meeting Of The
Minds.
Diane argues that the disputed account should be classified as nonmarital
based on the parties' mediation agreement. She maintains the superior court erred in
failing to address this argument. Ray responds that the court did not err because Diane
did not adequately present this argument for the court's decision and because there was
no meeting of the minds on the proviso regarding the Schwab account. We conclude
2 Ford v. Ford, 68 P.3d 1258, 1263 (Alaska 2003) (citing Dickerson v.
Williams, 956 P.2d 458, 462 (Alaska 1998)).
3 Id.
4 Id.
5 Engstrom v. Engstrom, 350 P.3d 766, 769 (Alaska 2015) (quoting Beals
v. Beals, 303 P.3d 453, 458-59 (Alaska 2013)).
6 Beals, 303 P.3d at 459.
7 Hanson v. Hanson, 125 P.3d 299, 304 (Alaska 2005) (citing Schmitz v.
Schmitz, 88 P.3d 1116, 1122 (Alaska 2004)); see also Kessler v. Kessler, 411 P.3d 616,
621 (Alaska 2018).
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that Diane sufficiently raised the question of enforceability before the superior court.
But the superior court's failure to address the argument was harmless because the
parties did not reach an enforceable agreement on the classification of the disputed
account.
Diane adequately presented the argument for the superior court's decision.
Her trial brief states that the parties had an agreement regarding the account. In closing
arguments Diane's counsel stated that "[t]here was nothing that wasn't provided that
was asked for" and that "[t]he real question for the court is if the court believes that the
agreement is a binding agreement." Counsel continued: "So our position is that
pursuant to our agreement at mediation, she has basically provided the information she
was supposed to provide, because the mediation agreement was, if you can show where
this money went and that you basically took out more than you - was considered
marital, it's yours." This was enough to preserve the issue for appeal.
However, her argument that the mediation agreement's proviso required
the court to classify the Schwab account as her separate property fails on the merits.
The record does not support the conclusion that the parties had a meeting of the minds
about this proviso.
"An essential requirement of an enforceable settlement agreement is the
parties' mutual assent to the agreement's terms."8 "In order for a contract to have been
formed, it [is] essential that acceptance of [the] offer be unequivocal and in exact
compliance with the requirements of the offer that [the offeror] ha[s] made."9 "The
mutual assent requirement 'cannot be defeated by the unexpressed subjective intent of
8 Colton v. Colton, 244 P.3d 1121, 1127-28 (Alaska 2010) (citing Walton v.
Ramos Aasand & Co., 963 P.2d 1042, 1045-46 (Alaska 1998)).
9 Walton, 963 P.2d at 1046 (second and third alterations in original)
(quoting Thrift Shop, Inc. v. Alaska Mut. Sav. Bank, 398 P.2d 657, 659 (Alaska 1965)).
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one of the parties; rather, it must rest on an objective manifestation of mutual intent
regarding the essential terms of the contract.' "10
On appeal the parties offer conflicting interpretations of what they
supposedly agreed to. Diane describes the proviso as a conditional agreement to
designate the account as separate property if Diane provided documents to prove that
the remaining funds were her separate property. Ray characterizes the proviso to be an
agreement to provide documentation, nothing more.
The record reveals that the parties never manifested the same
understanding of the proviso to which they nominally agreed. The court described the
proviso as "[Diane] needs to provide additional information to provide what happened
with the [account] . . . to confirm that, in fact, the marital portion of that plan - that
account has already been spent." Ray's counsel asked Diane: "You're going to show
documentation that any of the remaining funds in the [account] are nonmarital?" Diane
agreed. Diane's counsel asserted that such documentation had been provided, but Ray's
counsel disagreed.
The disagreement over the proviso's meaning was so apparent to the
parties that they refused to sign a written mediation agreement. In a post-mediation
email, Diane's counsel asserted that the requested documents had been provided,
satisfying the proviso and establishing the account as separate property. Ray's counsel
responded: "It remains our position that the funds contained in this account are marital
and should be divided accordingly by the court." Diane's counsel characterized this
response as an attempt to modify the settlement agreement. Ray's counsel responded
that they never agreed the account was nonmarital; rather, they agreed that it was
necessary to produce a complete transaction history to verify where the funds came
from.
10 Colton, 244 P.3d at 1128 (quoting Howarth v. First Nat 'l Bank of
Anchorage , 596 P.2d 1164, 1167 n.8 (Alaska 1979)).
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The parties never held the same understanding of the proviso. Without a
common understanding of what the essential terms were, there was no "mutual intent
regarding the essential terms of the contract."11 Consequently, the mediation agreement
does not control classification of the Schwab account.
B. The Classification Of The Disputed Account As Marital Property Is
Vacated Due To Legal Errors.
The central issue in this appeal is whether the disputed Charles Schwab
account contains Diane's separate funds or consists entirely of marital funds. Resolving
this issue requires considering the source of these funds and how they were handled
over time.
The superior court found that the funds in the Schwab account originated
from Diane's employer-provided deferred compensation account. Some of the funds
in this account were earned before the marriage and therefore were Diane's separate
funds, at least to begin with.12 When Diane married, subsequent contributions to the
account were contributions of marital funds, so the account came to have a mix of
Diane's separate funds and the couple's marital funds.13 The court found that these
funds were later transferred to an account at USAA and then to an IRA at Charles
Schwab. Based on these findings alone, the Schwab account would be a "mixed
secondary asset" - an "account derived from both marital and separate property
sources."14 When faced with a mixed secondary asset, the superior court must trace the
11 Id. at 1127-28 (quoting Howarth , 596 P.2d at 1167 n.8).
12 See Bilbao v. Bilbao, 205 P.3d 311, 313-14 (Alaska 2009) ("Separate
property includes property acquired by one spouse before marriage, property acquired
by gift, and property acquired by inheritance.").
13 Id. at 314 ("Assets acquired during marriage such as the salary of a spouse
are considered primary marital assets.").
14 Id. (citing Schmitz v. Schmitz, 88 P.3d 1116, 1128 (Alaska 2004)).
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secondary asset to its sources, "determine the ratio between the sources, and divide the
mixed secondary asset into marital and separate property according to that ratio."15
The superior court ultimately concluded that by the time the funds in the
deferred compensation account were transferred to USAA, the deferred compensation
account contained only marital funds. It appears to have concluded either that (1) all
funds in the account were transmuted to marital property when some funds were
withdrawn to make marital expenditures; or (2) Diane's separate funds were withdrawn,
leaving only marital funds in the account. Either conclusion amounts to legal error, as
we explain below.
1. Evidence that some funds were withdrawn from the deferred
compensation account and used for marital expenditures does
not support a finding that Diane intended to give her separate
funds remaining in the account to the marriage.
Separate property may be transmuted into marital property through an
implied interspousal gift.16 An implied interspousal gift occurs when "the owning
spouse, not the married couple," intends to "donate or convey separate property to the
marital unit" so that the "separate property [is] treated as marital property for the
purpose of dividing property in the event of a divorce ."17 The burden to prove donative
intent is on the party claiming an interspousal gift.18 Under this framework, the superior
court made insufficient factual findings to treat the entire account as an interspousal
gift.
15 Id. ; see, e.g., Schmitz, 88 P.3d at 1128 ("The marital and separate interests
in a mixed secondary asset are ordinarily in the same ratio as the marital and separate
contributions used to acquire the asset." (quoting BRETT R. TURNER, 1 EQUITABLE
DISTRIBUTION OF PROPERTY § 5.23, at 266 (2d ed. 1994))).
16 See Kessler v. Kessler, 411 P.3d 616, 619 (Alaska 2018).
17 Id. (emphasis in original) (internal quotation marks omitted).
18 See id. at 621.
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The superior court found that it was "[Diane's] intent at the time the
withdrawals were made . . . to donate to the marital entity." Ray describes the court's
decision as finding a donative intent for the entirety of the account because Diane
withdrew significant funds to cover marital expenses.19 But Diane argues that
"[n]owhere in the record is there support for the conclusion that [she] intended to gift
the entire balance" of the account; rather, she argues, the withdrawals demonstrate an
intent to donate only the amount contributed. Ray responds that the $40,000 withdrawal
in 2009 and the $75,000 withdrawal in 2016 for marital expenses, each sum roughly
half of the account's value at the time, demonstrate Diane's intent to donate any separate
20
funds remaining in the account to the marriage.
The cases Ray cites do not support this conclusion. Our decision in
Martin v. Martin involved very different facts.21 In that case we upheld the superior
court's finding that a business the husband purchased before the marriage was marital
property when the purchase was financed with marital funds and the wife worked
hundreds of hours for the business without pay.22 Our ruling in that case does not
suggest that when a spouse spends a portion of her separate funds on a marital purpose,
a court may infer that she intended to give the rest of the (unspent) separate funds to the
19 The superior court stated: "[Diane] claims that since there was a
$63,131.23 pre-marital balance, she should have that amount designated as non-marital
despite the fact that she withdrew close to that during the marriage to pay for marital
expenses. At the date of trial, the total value of this account was $102,100.55. Her
argument is not well founded and the court finds that her intent at the time the
withdrawals were made was to donate to the martial entity."
20 In his brief Ray characterizes the $40,000 withdrawal as a $50,000 loan.
But this is not entirely accurate. Diane testified that she initially withdrew $50,000 as
loan but was unable to pay back around $40,000. Consequently she paid a tax penalty
on the remaining $40,000 as an outright disbursement.
21 52 P.3d 724 (Alaska 2002).
22 Id. at 726-30.
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marriage as well. Ray next points to our decision in Layton v. O'Dea .23 In that case
we reversed the superior court's conclusion that investment accounts were the wife's
separate property.24 Ray emphasizes that our decision in Layton rested in part on the
fact that substantial sums were spent from the investment accounts on home
improvement. But in that case the husband testified that the spouses had agreed to
transmute the investment accounts into marital property in exchange for treating the
wife's salary, which would normally be marital property, as her separate asset.25 We
reversed the trial court's decision because it had not considered the possibility of this
spousal agreement.26 But in this case, there is no comparable evidence of a spousal
agreement to transmute the remaining separate funds in the deferred compensation
account into marital property.
We have held that a spouse's use of funds from a separate account to pay
marital bills is not enough to transmute the separate account into marital property. In
Odom v. Odom, for example, we held that a husband's "payment of money for marital
bills out of his separate account convert[ed] the money actually used into marital
property" but "d[id] not, without more, convert the entire separate account into marital
property."27 In Hansen v. Hansen we held that "[u]sing part of a premarital account for
a marital purpose does not change the balance of the [premarital] account into marital
property so long as no new contributions of marital funds to the [premarital] account
are made."28 The decisions are not precisely on point because in this case new
contributions of marital funds were made to the deferred compensation account. But
23 515 P.3d 92 (Alaska 2022).
24 Id. at 104-05.
25 Id. at 105.
26 Id.
27 141 P.3d 324, 332-33 (Alaska 2006).
28 119 P.3d 1005, 1014 (Alaska 2005).
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because traceable separate funds in a retirement account remain separate despite later
contributions of marital funds to the account,29 the basic logic of Odom and Hansen is
just as compelling here. Diane's premarital retirement funds remained her separate
property, and the fact that she spent some of them on the marriage is not, without more,
evidence that she intended to give all of them to the marriage. We therefore reverse the
superior court's ruling that Diane's separate funds within the account transmuted by
interspousal gift.
2. When funds are withdrawn from a mixed secondary account
for a marital expenditure, the default rule is that marital funds
are withdrawn before separate funds.
The superior court appears to have applied a "first in, first out" approach
to determine whether separate funds remained in the account after the large withdrawals
in 2009 and 2016 - meaning that the separate funds deposited first were also
withdrawn first. The court observed that Diane "claims that since there was a
$63,131.23 pre-marital balance, she should have that amount designated as non-marital
despite the fact that she withdrew close to that during the marriage to pay for marital
expenses" but described the argument as "not well founded." Diane argues this was
error because we adopted a "first in, last out" approach for withdrawals from mixed
assets in Pasley v. Pasley: i.e., separate assets acquired first are not used until later-
acquired marital assets are exhausted. Ray argues that Pasley involved accrued leave,
and its holding should not be applied to investment accounts containing both separate
and marital contributions. We hold that the rule adopted in Pasley applies here.
In Pasley we considered how personal leave that could be exchanged for
cash was depleted during the marriage when the leave hours were accrued both prior to
29 Schmitz v. Schmitz, 88 P.3d 1116, 1128 (Alaska 2004) ("[I]f possible, the
funds must be traced back to their source - either primary marital or primary separate
property.").
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and during the marriage.30 The wife had accumulated 483 hours of leave prior to the
marriage.31 During the marriage some leave was used and more leave was earned.32
At the time of separation the leave balance was 534 hours.33 We had previously held
that personal leave is a marital asset "akin 'to pension or retirement benefits, another
form of deferred compensation. ' "34 Therefore, we viewed the leave account as a mixed
secondary asset, similar to the account in this case.
Pasley presented the question of "whether the leave 'withdrawn' during
the marriage was marital or separate leave."35 We held that "a party who uses accrued
personal leave during a marriage first uses marital leave if such leave is available; only
after all marital leave has been exhausted does the party start using separate leave" -
first in, last out.36 Leave earned during the marriage is marital and leave spent during
the marriage is a marital expenditure; therefore, we reasoned, marital assets go towards
37
marital expenses.
Diane argues that this same principle applies to the account here,
especially since we compared a leave account to a retirement account in deciding
Pasley . Ray argues that an investment account is very different from a personal leave
account because the value of an investment account does not change uniformly. If the
premarital funds were invested poorly and the marital funds were invested well, the
30 442 P.3d 738, 749 (Alaska 2019).
31 Id.
32 Id.
33 Id.
34 Schober v. Schober, 692 P.2d 267, 268 (Alaska 1984) (quoting Suastez v.
Plastic Dress-Up Co., 647 P.2d 122, 125 (Cal. 1982)), quoted in Pasley, 442 P.3d at
749.
35 Pasley, 442 P.3d at 749.
36 Id.
37 Id.
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losses from the premarital funds could be overcome by the growth of the marital funds.
Applying the Pasley principle of first in, last out, Ray argues, would produce the
inequitable result of awarding Diane her separate property regardless of how its value
changed over time.
But Ray's argument is far more inequitable because it entails the
systematic forfeiture of a spouse's separate property to fund marital expenses without
any evidence of donative intent. This is not only unfair; it is contrary to our law on
38
transmutation by interspousal gift.
We therefore adopt here what was implicit in Pasley : withdrawals from a
mixed retirement account for marital expenses first reduce the marital portion of that
account, unless the parties agree otherwise. On remand, the superior court must
determine the value of the separate and marital portions of the account following each
withdrawal consistent with this principle.
C. Diane Was Not Required To Demonstrate The Respective
Performance Of Marital And Separate Contributions To Sufficiently
Trace The Separate Funds.
Ray argues that the court's conclusion can be affirmed on the alternative
ground that Diane failed to meet her burden of proof to trace funds in the Schwab
account back to her separate premarital funds. We have said "[t]he party seeking to
establish that a secondary asset is separate property 'always bears [the] burden of proof;
thus untraceable assets are marital property.' "39 Ray argues that Diane did not meet
her burden because she did not present evidence of the respective growth of separate
and marital contributions to the deferred compensation account. Therefore, Ray
38 See, e.g., Kessler v. Kessler, 411 P.3d 616, 619 (Alaska 2018) (explaining
that transmutation by implied interspousal gift "occurs when one spouse intends to
donate separate property to the marital estate and engages in conduct demonstrating that
intent").
39 Bilbao v. Bilbao, 205 P.3d 311, 3 14 (Alaska 2009) (alteration in original)
(quoting Schmitz v. Schmitz, 88 P.3d 1116, 1128 (Alaska 2004)).
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maintains, Diane failed to produce sufficient evidence of the ratio of contributions to
the Schwab account to permit a finding that some of the Schwab account is Diane's
separate property. We disagree.
We stated in Schmitz that "[t]he marital and separate interests in a mixed
secondary asset are ordinarily in the same ratio as the marital and separate contributions
used to acquire the asset."40 Ray's argument would require a spouse claiming the
existence of separate property to show not only the proportion of separate contributions
(i.e., the contributions before marriage versus contributions during marriage), but also
the respective performance of those contributions after they are made. This approach
would require a showing of which contributions were invested in which securities and
calculation of the respective gains and losses over time to produce a ratio based on
performance as well as contribution. According to Ray, if the spouse fails to make this
detailed showing, then the spouse has failed to sufficiently trace the contributions and
41
all of her separate contributions before marriage are transmuted into marital property.
Ray's approach improperly elevates precision at the expense of fairness.
If a spouse claiming separate property in a mixed secondary asset establishes the
proportion of separate contributions to marital contributions, that spouse has
sufficiently traced the separate portion of the retirement account.42 Of course, the other
spouse may present more detailed evidence about the performance of the marital and
separate contributions. Expert testimony might persuade the court that the marital and
40 Schmitz, 88 P.3d at 1128.
41 See id. ("[P]lacing separate property in joint ownership is rebuttable
evidence that the owner intended the property to be marital. If evidence is presented
that is sufficient to overcome this presumption, tracing can take place." (footnote
omitted)). But see Odom v. Odom, 141 P.3d 324, 332 (Alaska 2006) ("[I]t is well
established in Alaska that the mere commingling of separate property with marital
property does not lead to a finding of transmutation.").
42 Schmitz, 88 P.3d at 1128-29. See generally BRETT R. TURNER, 1
EQUITABLE DISTRIBUTION OF PROPERTY § 5:25 (4th ed. 2019).
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separate portions of the account should be calculated on a different formula than
respective contributions.43 But we decline to rule that unless a spouse provides that
kind of detailed expert testimony, the spouse forfeits her entire separate interest in the
retirement account.
Accordingly, Diane's burden was to prove the following: (1) that separate
funds were contributed to the deferred compensation account and (2) that those funds
can be traced to the account now in dispute.44 It is uncontested that her separate funds
were contained within the original deferred compensation account. And the superior
court found that Diane sufficiently traced those funds to the Schwab account now in
dispute.45 Therefore, we remand for the superior court to calculate the respective
separate and marital portions of the Schwab account.
43 See TURNER, supra note 42, § 5:25 ("In the real world, the amount of
appreciation will be different every year, and the amount of marital and separate
contributions made will differ every year as well. To achieve maximum fairness,
therefore, we should determine the marital and separate interests by applying the
allocation formula separately for each year in which the parties are married."). But see
id. § 5:63 ("Many well-constructed tracing arguments have fallen apart because the
court did not believe the proponent's evidence on a particular link in the tracing
chain.").
44 See Schmitz, 88 P.3d at 1128 ("To characterize a mixed secondary asset,
the superior court must know the character of each source feeding into the mixed asset
and the amount of value each source contributed to the mixed whole. The court can
then determine the ratio between the sources." (footnote omitted)).
45 Ray does not challenge this specific finding on appeal. And even if he
had, there is sufficient evidence to support the superior court's factual finding on this
point. The account statements in the record alone do not prove that the $83,077.73
investment into the Schwab account in May 2020 was the same as the $88,407.65
withdrawn from the deferred compensation account in May 2018. But at trial Diane
testified that the deferred compensation funds were transferred to a USAA account and
"sat there happily" until May 2020, when those funds were deposited into the Schwab
account. It is apparent that the court credited this testimony because it found that the
funds "originated from [Diane's] deferred compensation plan. She removed that
amount from deferred comp and placed into USAA, then into Charles Schwab."
-17- 7734
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CONCLUSION
For the foregoing reasons, we VACATE the superior court's division of
property and REMAND for further proceedings consistent with this opinion.
-18- 7734
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