If you and your spouse are divorcing, and cannot agree on how your property and debts are going to be divided, then you can ask the court to decide. The request is for an “equitable distribution of property.” “Equitable” does not mean equal, it means fair.
What Property will the Court Divide?
Inventory: The first thing to do is to make a list of all of the property and debts. This means real property, bank accounts, retirement plans, cars, investment accounts, business interests, antiques, etc. It doesn’t matter whose name the property or debt is in – this is only the inventory. Our initial intake forms asks for this inventory.
Classificiation/Titling: Once we identify the property, it can be “classified” as marital or separate property. The court can divide marital property only. Separate property belongs only to one of the parties, and won’t be divided by the court. Generally, all property that is earned or bought with money that is earned during the marriage will be marital property. Separate property includes property that was fully owned prior to the marriage, or property/funds that were inherited or gifted to only one of the spouses during the marriage.
Just because property is titled in one spouse’s name, does not mean that the account is separate property. In some instances, jointly titled property might not even be marital property. The key to proving that something is separate (or marital) property is to maintain a good paper trail. We spend a lot of time with paperwork trying to trace an inheritance received years ago to a current investment account, or proving that funds in a separately titled account actually came from a spouse’s earnings during the marriage. This investigation is pivotal in determining whether the court can divide property (it’s marital!) or not (it’s separate!).
Will the Court Divide My…
(1) Marital home?: The court can order a jointly titled home to be sold or can award the home to one of the parties. Typically, if listed for sale and sold, we might ask the court to decide who has possession and who pays the expenses of the home until sale, and finally how the net proceeds of sale would be divided. If, the house is awarded to one spouse, that spouse might owe the other spouse a share of the equity. Perhaps, he pays the other a cash equivalent, or sets off the share by letting the other spouse keep another equivalently valued item of property.
(2) Retirement accounts?: These are often “hybrid” property, i.e. part separate and part marital. The court may award up to 50% of the marital portion of a spouse’s retirement account to the other spouse. Retirement accounts are usually divided by using a Domestic Relations Order, which enables tax and penalty free transfers between spouses. The marital share of a defined contribution plan (like an IRA or 401(k)) is the amount that is earned from the date of marriage to the date of separation (including earnings and losses on that amount).The marital share of a defined benefit plan (like a pension or other annuity type plan) is usually calculated comparing the number of months the pension was earned during marriage to the total number of months that the pension was earned until retirement. The exact amount of the marital portion might be unknown at the date of divorce, simply because the amount of the monthly retirement payment itself is unknown. Each spouse would simply receive his and her share of the retirement as and when it is ultimately paid.
(3) Vehicles: This includes cars, boats, airplanes, etc. Like houses, we need to know the “net” value – i.e. the fair market value and the lien on the property. The amount of the lien should be easy to establish, but the fair market value might be more difficult. If you and your spouse do not agree on the value, we need to present some evidence of value. This might include hiring an expert appraiser, obtaining some acceptable written evidence of value (e.g. NADA valuations), or sometimes we only have the parties’ testimony.
(4) Businesses: If you or your spouse owns a share in a business (other than just stock in a publicly traded company), you should definitely explore various issues with your attorney. The portion of the business that is marital and separate depends not only on what money was used to fund the business, but also what and when personal efforts of the spouse were used in the business. Of course, the value of the business may also be highly disputed. We often hire business evaluators to review the books of the business and provide an expert opinion on the classification and value of the business. Often, the expert may also be able to uncover information that will affect what the business owning spouse’s income actually is or should be (see discussion on spousal and child support). Businesses are tricky, as valuations include not only inventory, but also such intangible things such as business and personal goodwill. While the non-owning spouse would not necessarily be awarded a share of the business, he/she could be awarded an equitable sum of the marital portion of the business.
How do I Get More Than 50%?
Section 20-107.3 of the Virginia Code sets forth several factors the court must consider in deciding how to divide marital property. Often, the most important factors include
(1) the positive and negative monetary contributions of each party to the marriage, and to marital property. Positive monetary contributions include earning an income, and gifting separate property to the marriage. Negative monetary contributions include wasting money, and using marital funds on non-marital purposes (like an affair); and
(2) the positive and negative non-monetary contributions of each party to the marriage, and to marital property. Positive non-monetary contributions include staying home to raise children and maintaining the home. Negative non-monetary contributions include physical or mental abuse, adultery, or even simply not participating in family activities and chores.
Many other factors are considered by the court in determining what property division is “fair” and “equitable.” If you prove that the bulk of the factors are in your favor, you have a good chance of being awarded more than 50% of the property. Putting together a clear and compelling case to the court with the help of your attorney is essential!