Can a spouse receive credit for marital expenses paid during divorce proceedings? Stephenson v. Stephenson Explained

In a complex property division case spanning six years of litigation, the Utah Court of Appeals addressed when divorcing spouses should receive credit for marital expenses they pay during the pendency of divorce proceedings. The court’s decision in Stephenson v. Stephenson provides important guidance on equitable property distribution and expense allocation.

Background and Facts

Kerry and Shauna Stephenson divorced after thirty-one years of marriage, owning various properties including a commercial rental property through KMK Properties LLC and a residential property under construction called Bell Canyon. During the lengthy litigation, Kerry managed KMK and completed construction on Bell Canyon using funds from the parties’ joint investment account. The district court entered temporary orders allocating responsibilities and rental income distributions, but disputes arose over expense reimbursements and credits. After two separate bench trials, the court rejected Kerry’s claims for credits related to Bell Canyon completion costs and certain KMK expenses, while crediting Shauna $60,000 for allegedly missed rental distributions.

Key Legal Issues

The appeal centered on three main issues: (1) whether Kerry should receive credit for legitimate Bell Canyon completion costs paid from marital funds; (2) whether Kerry should receive credit for KMK business expenses incurred after a 2019 court order; and (3) whether sufficient evidence supported the court’s award to Shauna for missed distributions.

Court’s Analysis and Holding

The Court of Appeals held that the district court abused its discretion by failing to credit Kerry for legitimate marital expenses he paid from his share of marital assets. Regarding Bell Canyon, the court found that while the completion costs were paid with marital funds, Kerry should not bear the entire burden when these were legitimate marital expenses. The court explained that to achieve an equal division, Shauna’s credit should have been reduced by her half of the completion costs. For KMK expenses, the court found the district court erroneously relied on a purported stipulation when Kerry had actually objected to the expense allocation arrangement. However, the court affirmed some findings, including the award for 2021 distributions to Shauna, while reversing the 2020 distribution award as unsupported by evidence.

Practice Implications

This decision emphasizes the importance of precise expense documentation and clear temporary orders during divorce proceedings. Practitioners should ensure clients maintain detailed records of all marital expenses and seek specific court guidance on expense allocation responsibilities. The case also demonstrates that courts must carefully trace marital funds and provide appropriate credits to achieve truly equitable property division, particularly in complex, multi-year litigation involving business assets and ongoing expenses.