Division of Property in a Divorce
The division of property can be one of the most confounding aspects of any divorce. However, regardless of this, property that has been acquired during a marriage must be dealt with and disposed of when parties separate and ultimately divorce. Obviously, if the parties can agree upon a division, they are quite far ahead of the game and the process can be straightforward when an agreement is reduced to writing. Yet, such is not always the case. Many times, bitter disputes break out over not only who will receive the property, but what property should even be included in the equation. Though there will be variations of the specific laws from state to state, there are a number of general laws that apply to the division of property in a divorce. These general principles will likely come into play when property issues are being negotiated by attorneys or when the matter is being addressed in some alternative dispute resolution setting.
To understand how property is viewed in a domestic setting, there are two general approaches that are used, depending on the state in which you live or in which you divorce may be pending. These are the community property approach and the non-community property approach, though in some states, the non-community property approach is referred to as the “division of marital property,” “equitable division” or some derivative thereof.
In states that use the community property approach, all property acquired during the marriage is either community property or the separate property of one spouse. Community property is divided equally between the spouses, regardless of how the property was acquired, the parties’ individual contributions to the acquisition of the property, how the property was used by the parties or how the property may be titled. In short, in community property states, if the property came into existence during the marriage, it is shared equally by the parties with few exceptions.
Primarily, by way of exception, if the property was acquired during the marriage by one party as that parties’ separate property, then it can be excluded as community property and will go solely to that spouse with no offset or credit against community property. Examples of this would be property that was acquired by gift or inheritance. The theory is that if the property was given specifically to one spouse, then the other spouse should not be able to defeat the intent of the gift. However, the spouse that receives the gift has to exercise caution in how the property is used. If the property is used in furtherance of or to benefit the marriage, then it could be classified as community property and ultimately divided equally between the parties. As well, just because a party wants property to be separate property does not mean it will be so.
In summary, in a community property jurisdiction, if the property was acquired during the marriage, then with only limited exception, the property will be equally divided between the parties.
The non-community property, marital property or equitable distribution approach can vary a great deal from the community property approach. And, while the majority of the states use the non-community property approach, the application of this approach can, and does, vary from state to state. To determine exactly how your state views the property from a marriage, consult an attorney licensed to practice in your jurisdiction. However, there are a few concepts to keep in mind that are generally found in some form in most states when property is to be divided.
Generally, there are several different steps that must be completed prior to determining which spouse receives specific property. While there may be variations, the steps usually involve the identification of the property, classification of the property, the valuation the property and ultimate division of the property. In all states, there will be a timeframe with two operative dates used in determining what property is to be divided. The first date, usually the date of the marriage, is the point after acquired property, unless excluded, will be considered marital. The second date will be the date after which acquired property will no longer be considered marital property.
While generally the date of the marriage is used as the first date, some jurisdictions will use alternative dates such as when the parties may have first started cohabiting or when they first jointly acquired property. The different jurisdictions also use a variety of dates to determine the latest date that would allow property to be considered marital. Such dates include the date of separation, the date of filing pleadings addressing the property of the marriage, a date agreed upon by the parties or perhaps, even the date the case goes to trial.
Once the time frame on the acquisition of property is determined, property must be identified as marital or non-marital. Many people believe it possible to acquire property during a marriage using money or funds they individually earned and have that property be non-marital. These people also frequently hold the belief that property titled solely in their name is their non-marital property. These are two myths that are often incorrectly believed, usually to the detriment of parties going through a divorce. As most jurisdictions view any income earned by either party as marital property, any property acquired by the use of these funds during the marriage is almost always marital property. Additionally, most jurisdictions have statutes that make property marital regardless of how it is titled. In other words, simply because one spouse titles a piece of property, such as a house, solely in their name, the other spouse still retains an interest in the property.
This also allows a spouse protection from the other spouse engaging in conduct such as transferring assets to a third party to shield the property from division. However, there are ways in which property can be excluded from being marital. As in community property states, if property is given directly to one spouse and it is not used in furtherance of the marriage, gifted or inherited property can be considered non-marital. It is also possible for property that started out as non-marital to become marital depending on how the parties treat the gifted or inherited property. That which is marital will be divided by between the parties. Non-marital property will not. As well, in general, Courts are prohibited from dividing non-marital property.
Once the property has been identified, that which is marital is allocated between the parties in some percentage. Typically, this process is known as equitable distribution. This distribution can be 50-50 between the parties; however, the Court can allocate the property in any manner in which the laws of the particular jurisdiction allow. In each state, there are a number of factors used in determining how the property should be divided between the parties.
Factors include, but are not limited to and do vary from state to state.
1. The length of the marriage.
2. The number of children.
3. The amount of liquid assets in the marriage.
4. The need for the children to remain in the marital home.
5. Any separate property of the parties.
6. The tax consequences to the parties as a result of division of property.
7. The parties’ non-marital property.
8. The contribution of each spouse to the acquisition of the property.
9. The potential for the parties to work in the future
10. How the property is titled.
There are also a number of other factors that different states may use, but the primary purpose of these different factors is to give the Court an understanding of how best to allocate the property between the parties. As well, while some jurisdictions don’t consider it, some jurisdictions consider any marital fault when dividing the property. While one spouse’s fault will not completely bar them from receiving a portion of the marital property, they may likely receive a smaller share of the property. In some jurisdictions, if there is fault in the breakup of the marriage, the non-aggrieved spouse could receive as much as a 65 or 70 percent of the marital property with the other spouse receiving less.
Many people feel that in a divorce, their spouse will attempt to hide property or attempt to play fast and loose with giving the location of the property from the marriage. It is possible for Court’s to issue restraining orders applicable to the parties prohibiting them from liquidating or hiding property. Non-marital property, as it will not be divided, will also be protected so long as it has not been used by the parties in such a fashion as to make it marital property. Keep in mind that most domestic courts have limited, if any, jurisdiction over non-marital property. In addition to the gifts and inheritances that are non-marital property, property that was owned prior to the marriage, so long as it was not treated as marital, is non-marital property. However, fair warning. Just because property starts off as non-marital property, doesn’t mean it will remain that way. For example, if a spouse owned a house before a marriage, the other spouse’s residing in the property will not be enough to make it marital. However, say the house was refinanced and titled jointly, then the character of the property could change to marital.
In most jurisdictions, the legislatures have given broad meaning to the term marital property which is having the effect of moving more and more jurisdictions toward, if not in name, to the practice of community property where all property is ultimately equally divided between the parties. This legislation, while varying from jurisdiction to jurisdiction, gives no concern to how property is titled, and in some areas even refusing to consider the efforts of one spouse in individually obtaining the property. However, the exception for the consideration of gifted or inherited property still generally applies.
Ultimately, once the property is classified as marital or non-marital and each spouse is awarded a percentage, then the property has to actually be divided. Generally the process is for property to be divided in kind, meaning that each spouse will receive specific items of property from the marriage. However, an in kind division is not always possible. For example, if all the property except a home, a car, or other item has been divided, or if there are items that neither party wants, then the items, or items, can be sold and the proceeds divided between the parties.
This article is not offered as, nor is it to be construed, as legal advice, nor does it create any relationship, attorney/client or other, between the author and the reader. To obtain any legal advice, consult an attorney licensed to practice law in your state.
