APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT SPINK COUNTY, SOUTH DAKOTA, HONORABLE TONY L. PORTRA Judge.
The opinion of the court was delivered by: Meierhenry, Justice
CONSIDERED ON BRIEFS ON AUGUST 24, 2009
[¶1.] Sheila A. Hansen (Sheila) appeals from the circuit court's property division in her divorce from Brian R. Hansen (Brian). Sheila alleges the circuit court erred by disregarding the life estate interest in the couple's marital home when determining the value of the property. We agree and reverse the circuit court.
[¶2.] Sheila and Brian were married on June 18, 1988, in Redfield, South Dakota. After marrying, the couple lived in a home originally owned by Wilbur and Judy Masat. The Masats are Sheila's parents. Sheila and Brian paid $50 per month in rent to the Masats from 1988 until 2002. In 2002, Sheila's parents deeded the home to the couple as joint tenants so they could obtain a bank loan to make improvements to the residence. This conveyance was a gift from the Masats to Sheila and Brian. The Masats did, however, retain a life estate in the property.
[¶3.] Sheila and Brian made significant improvements to the property after the Masats conveyed it to them.These improvements included the addition of a new kitchen, installation of a high efficiency propane boiler, the addition of a two-stall garage, new siding and insulation, new windows, and the removal and reinstallation of hardwood floors. Both Sheila and Brian contributed their time and labor in making these improvements.
[¶4.] Neither party presented evidence of the home's value when it was originally purchased or when it was gifted in 2002 prior to the improvements. Brian's expert witness, Sheryl Erickson, a real estate broker and real estate appraiser in the Redfield area, testified that the fair market value of the property as of September 9, 2008, was $141,000. Erickson testified that she did not know what effect a life estate would have on the property's value because she had no prior experience selling or evaluating homes encumbered with such an interest. Sheila presented evidence that the value of the marital interest in the home was $35,968, which represented the value of the remainder interest. Sheila arrived at this figure by applying a calculation table promulgated by the South Dakota Department of Social Services for calculating the value of a life estate for indigent long-term care eligibility. See ARSD 67:46; SDCL 28-6.
[¶5.] The circuit court determined that the couple's marital interest in the property was $141,000.*fn1 Sheila's only issue on appeal is whether the circuit court's finding that the marital interest in the home was worth $141,000 was clearly erroneous.
[¶6.] On review, we do not overturn the circuit court's findings of fact unless such a determination was clearly erroneous. Walker v. Walker, 2009 SD 31, ¶2, 765 NW2d 747, 748. Only if we are left with a "definite and firm conviction that a mistake has been made" will we reverse a circuit court's findings of fact. Terca v. Terca, 2008 SD 99, ¶19, 757 NW2d 319, 324 (quoting Johnson v. Johnson, 451 NW2d 293, 295 (SD 1990)).
[¶7.] A property division analysis requires identifying marital property subject to division. Terca, 2008 SD 99, ¶19, 757 NW2d at 324 (citing SDCL 25-4-44)). In this case, the circuit court determined that the marital home was subject to division in the divorce proceeding because of the length of the marriage, the conveyance from the Masats as a joint tenancy, and the significant improvements to the home made by both Sheila and Brian. See Muenster v. Muenster, 2009 SD 23, ¶16, 764 NW2d 712, 717 ("All property may be divided, regardless of its title or origin" (quoting Christians v. Christians, 2001 SD 142, ¶13 n1, 637 NW2d 377, 381 n1)). However, the marital home was encumbered by Masats' life estate interest. Sheila and Brian only had a remainder interest in the property. Thus, only the remainder interest held by Sheila and Brian was marital property subject to division.
[¶8.] Sheila presented evidence that the Masats' life estate affected the fair market value of the remainder interest. Her calculation for the couple's remainder interest was based on an actuarial table used by the Department of Social Services. See ARSD 67:46:05:08. The Department uses this table to assess an individual's ability to pay for long-term medical care services. Id. The Department considers a life estate an available resource to help pay for a recipient's medical care.*fn2 Based on a fair market value of $141,000, Sheila applied the Department's actuarial table to conclude that the value of the remainder interest in the property was $35,968.
[¶9.] The circuit court valued Sheila's and Brian's marital interest in the home at $141,000 -- the full fair market value of the home. The circuit court rejected Sheila's contention that the Masats' life estate diminished the value of their interest in the property. The circuit court's determination that the value of the home was unaffected by the life estate appeared to be based on Judy Masat's testimony ...