Economic issues around the breakup of a marriage

Question 1

Property division around breakup of marriage- dominant method

Answer 1

: equitable distribution. 2 step task.

i. First, categorize the assets. Not discretionary. Rules on categorization. Easy to test. 3 categories:
1. Spouse A’s separate property
2. Spouse B’s separate property
3. Marital assets.
4. Separate property—
a. anything owned by spouse prior to the marriage is separate property.
b. Anything spouse inherits or gets as gift after date of marriage in his sole name is separate property.
c. Any appreciation in value that was owned individually prior to marriage
i. Like 401k spouse owned prior to marriage, the appreciation is separate asset
ii. Or restaurant appreciates due to labor (part is market/inflation, part is his labor)
1. Some jurisdictions-> appreciation due to effort and labor is treated as marital asset.
iii. Passive appreciation due to market vs. active appreciation.
d. Anything obtained in exchange for items owned prior to marriage
i. Basically there is asset tracing.
5. Everything else they acquire is marital asset, regardless of who earned money to pay for it, regardless whose name is on the title.

ii. Second, distribute assets in equitable fashion.
1. First rule—each spouse keeps separate property.
2. Second rule—for column that is marital, court uses its discretion to come up with equitable discretion. Factors court considers:
a. Anything making it harder for one spouse to earn money
i. Age and health of spouses—maybe give more to older spouse. Harder to find new job/ accumulate wealth
ii. Phsycial disability or chronic illness
iii. Chronic depression
b. Education, current income, earning capacity
ii. Job skills—has one stepped out of workforce to take care of kids?
c. How much separate property each one has –
i. Equity may suggest giving slightly more to other spouse
d. Duration of marriage-
i. If longer marriage, more justified to split assets more equally.
ii. Pretty soon everything gets mixed up.
e. Is one spouse going to be custodian of MINOR children-
i. Good argument to give that spouse the home instead of divide assets 50/50 and force kids to move
g. Anything logical can be taken into account though.

f. Most jurisdictions—marital fault is NOT CONSIDERED with regard to distribution of assets
3. Then, court can distribute assets IN KIND- decide who gets what specific assets. Or alternatively, can just give cash award. Write check from one to the other. Awards are final. Cannot come back for modification.

Question 2

Alimony

Answer 2

2. Alimony – AKA maintenance AKA spousal support.
   b. Concept: when in marriage, there’s idea of financial interdependence. Idea is there may be too abrupt of a disruption.

d. All about support function, not punitive or sanction. Whether/ how much is subject to equitable division. Care about education, job skills, earning capacity, age, health, who is custodian of minor children.
e. Secondary/ tertiary factors will be in fact pattern.

f. Majority of jurisdictions DO ALLOW determination of marital fault in determination of alimony
i. Abuser won’t get as much alimony.

Question 3

How alimony awards can be structured

Answer 3

g. How awards can be structured
i. Permanent periodic payments – usually monthly. Duration forever.
ii. Lump sum alimony- single payment. Appropriate if wealthy spouse is old or sick.
iii. Rehabilitative award- time limited award that is correlated to a period that recipient needs to obtain skill, education or training.
1. For example alimony for however long to finish nursing school
iv. Reimbursement award—like damage judgment. For example one spouse worked to subsidize other spouse in a way that enhanced earning capacity, now they’re getting divorced, that spouse can ask for repayment.
1. For example can get back law school tuition and living costs during law school.

Question 4

Alimony modifiability

Answer 4

i. If periodic, can be modified
1. Permanent periodic and rehabilitative are modifiable
2. Must show substantial change in circumstance
a. For example, the person paying the alimony loses job.
b. Or the person receiving the alimony’s needs go up
c. Or there’s been a lot of inflation (external reasons)

ii. Lump sum or reimbursement cannot be modified

iii. Termination—if time period, it expires at end.
1. Automatic termination—
a. death of either party
b. remarriage of recipient.
i. But if you live with someone else to avoid termination of alimony → potential reason to terminate award. Turns on whether they have combined economic resources.