Virtually all divorce cases, as well as annulment cases and separation cases, involve the division of property. In some cases, this will involve very simple issues such as who gets to keep which car or how to split up a bank account. In other cases, however, the division of marital property can become quite complex, including how to distribute the value and proceeds of a family business, how to split up retirement benefits and investments, how to divide intangible assets such as the value of a copyright or a trademark registered to one of the spouses, and how to divide real estate where one of the parties intends to remain living with the children.
The first step in all such cases is to determine what property division regime applies in the state where the case is unfolding. In many cases, for example, the divorce statutes provide for equitable distribution of marital assets. Equitable distribution does not mean equal distribution in other words, in an equitable distribution state, it may be equitable to give one party a greater share of the proceeds from the sale of the marital home while giving the other party a greater share a retirement fund. Some states follow a community property regime. The community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Puerto Rico is also a community property jurisdiction. Community property is generally divided equally between the two parties. It is regarded as owned jointly by both spouses, and therefore a 50/50 division of the property is required under state law.
In some limited cases, a state will file a title regime. In such circumstances, the court will allocate the property to the person who owns title to it, without specifically considering how or when the property was acquired or whether it would be equitable to make such a distribution.
Spouses should never attempt to divide their significant property items in a divorce case without the assistance of trained legal counsel. There may be tax consequences or insurance risks associated with making a distribution of property without taking the appropriate measures in advance. Legal counsel can help determine whether property is even subject to distribution in a divorce. For example, property which a spouse receives through a gift or an inheritance may belong to that spouse only, and in most states, such property need not be shared with the other spouse. Similarly, pre-marital property, which was owned or acquired by a spouse before the wedding day, may be awarded to that spouse alone. Yet, if the pre-marital property is blended with marital property or modified during the course of the marriage, it may become subject to distribution between the spouses during the marriage. An experienced attorney can discuss such issues as commingling of assets, and transmutation of property during a marriage.
A court will consider many factors in determining how to distribute marital property. Particularly, in equitable distribution states, it is common for the court to weigh a number of statutory factors before determining who gets which property.
Among the common factors considered by the courts in such states are:
- The duration of the marriage or civil union;
- The age and physical and emotional health of the parties;
- The income or property brought to the marriage or civil union by each party;
- The standard of living established during the marriage or civil union;
- Any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution;
- The economic circumstances of each party at the time the division of property becomes effective;
- The income and earning capacity of each party, including educational background, training, employment, skills, work experience, length of absence from the job market, custodial responsibilities for children, and the time and expense necessary to acquire sufficient education or training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage or civil union;
- The contribution by each party to the education, training or earning power of the other;
- The contribution of each party to the acquisition dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contribution of a party as a homemaker;
- The tax consequences of the proposed distribution to each party;
- The need of a parent who has physical custody of a child to own or occupy the marital residence or residence shared by the partners in a civil union couple and to use or own the household effects;
- The debts and liabilities of the parties;
- The need for creation, now or in the future, of a trust fund to secure reasonably foreseeable medical or educational costs for a spouse, partner in a civil union couple or children;
- The extent to which a party deferred achieving their career goals;
- The desirability of retaining any asset, including an interest in a business, corporation or professional practice, intact and free from any claim or interference by the other party;
- The desirability of retaining the marital home as a residence for dependent children;
- The loss of inheritance and pension rights upon dissolution of the marriage;
- The loss of health insurance benefits upon dissolution of the marriage;
- Any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
- Any stock brokerage and/or realtor fees, and other inchoate expenses that will be incurred in the transfer of the property, where the court can make such determinations without speculation;
- Marital misconduct affecting property such as the willful concealment or destruction of assets.
Understanding how to apply these factors in a particular case is important. It is also important to gather the necessary evidence to address each of the relevant factors. Not all states apply each of the factors noted above, and some states rely on other factors not listed above. It is therefore important for spouses to communicate in detail with their attorneys about the various factors and considerations to be addressed in the distribution of marital assets.