Property Division Flashcards
1) Division by court
a) Approaches
i) Majority approach: in a majority of states, marital property is divided at divorce but
separate property remains the property of the owning spouse.
(1) Some states will allow the court to dip into separate property if there are special
circumstances, like hardship.
ii) Minority “hotchpot” approach: the court may divide all assets, whenever or however
acquired.
1) Division by court
b) Martial vs. separate property (majority approach)
i) Marital property
(1) Marital property includes any property acquired during the marriage (even if it is acquired after separation but before a final divorce decree).
(a) Note: Title does not control! Look at when the property was acquired.
(b) Note: in a minority of states, property that accrues after the date of permanent separation is not considered marital.
(2) Examples of marital property
(a) Wedding gifts unless the gift is only appropriate for the use of one spouse
(b) A home acquired during marriage (look at who paid the mortgage, appreciation,
etc.)
(c) Pension and retirement accounts accrued during marriage
(d) Stock options earned during marriage
(e) Businesses acquired during marriage
(f) Lottery winnings earned during marriage (usually marital)
(g) Debts acquired during marriage
ii) Separate property:
(1) Separate property includes (mnemonic = BIG):
(a) Property acquired before marriage.
(b) Inheritance.
(c) Gift: a gift to one party.
(2) Separate property can become marital property if marital funds or significant effort by the ownerspouse during the marriage enhances its value or builds equity. (However, the fact that a separate asset appreciates during the marriage does not turn it, or its appreciation, into marital property.)
(a) Ex.: If a husband’s stock that he inherited appreciated during the marriage (without any effort and without marital funds), then it would be separate property. However, if he purchased bonds with marital funds, it would be marital property.
(b) Ex.: In the example above, if the husband purchased the stock prior to the marriage and actively managed the funds during the marriage, the appreciation would be marital property, but the original amount contributed would not be marital property.
(c) Ex.: If a woman won the lottery during marriage, the lottery winnings are marital property (even if she received the money after the divorce was final).
iii) Professional degrees: approach to professional degrees (Feb 2010, Feb 1995)
(1) States, by an overwhelming margin, have rejected the claim that a professional
degree or license is property subject to division at divorce. (A minority of states say otherwise.)
1) Division by court
c) Equitable division
In most states, property is divided “equitably” and a court will consider what is fair. It will look at contribution (monetary and nonmonetary), need, and marital duration.
i) Fault for breakdown of marriage (e.g., adultery): a majority of states do not consider this type of fault in the division of property.
ii) However, states will consider economic fault (contribution of each party).
(1) Note: a role of a homemaker is a form of spousal contribution.
2) Division based on premarital agreement
a) A court will enforce a premarital agreement so long as it is voluntarily made, substantively fair, and if full disclosure of assets and obligations was made.
i) Many courts will invalidate a prenuptial agreement if they find any of the following:
(1) Involuntariness
(a) A court will find that an agreement was entered into voluntarily unless there was
fraud, duress, or coercion.
(i) Note: insistence that someone sign the agreement does not establish involuntariness.
(ii) Note: lack of legal counsel does not establish involuntariness (although it is a factor).
(2) Unconscionability
(3) Inadequate disclosure
ii) Under the Uniform Premarital Agreement Act (UPAA), adopted by 27 states, a court must enforce an agreement (even one that is substantively unfair) unless it finds:
(1) involuntariness, or
(2) that the agreement was unconscionable when executed and that the party did not
receive adequate disclosure of assets.
b) Today, all states permit spouses to enter into premarital agreements.
c) A court will not enforce a premarital agreement regarding child custody or support if it is not in the best interest of the child.
i) Ex.: A provision in the parties’ premarital agreement stated that the parents would share joint custody of the child. This will not be enforced. The court will instead look at the best interest of the child.
ii) Ex.: A provision in a couple’s premarital agreement waived child support. This will not be enforced. However, the unenforceable terms are usually stricken out and the remaining provisions will remain enforceable.
3) Division based on settlement agreement
a) When a divorce settlement agreement is entered into prior to the final judgment of divorce, the court has “great freedom” to reject it, accept it, or accept it with modifications.
b) Most states say that an agreement may be set aside based on fraud, overreaching, or duress, that results in an agreement substantively unfair to one of the parties.
i) A few courts have also said held that spouses have fiduciary obligations toward each
other that continue during the negotiation of the settlement agreement when one
spouse is unrepresented by counsel.
ii) Lack of legal counsel by one spouse will not invalidate an agreement, but courts will
examine the circumstances that led to waiver of counsel. (Note that an attorney may not ethically represent both spouses in drafting an agreement.)
iii) Substantial mediator misconduct (e.g., when the mediator is biased, does not disclose the bias, and does not remain neutral) is a basis for setting aside a settlement
agreement.
4) Property division where a couple is not married
a) Courts used to not allow cohabitants to agree to divide property a certain way if they were in a “meretricious relationship,” but ever since the California Supreme Court’s landmark decision in Marvin v. Marvin, many states say that cohabitation agreements are enforceable so long as the agreement does not involve the explicit exchange of money for sex.
i) Many states do not require such agreements to be in writing or even to be clear and
specific. Oral agreements to share or “do right by” each other have been held to create
enforceable claims to post-relationship property division and/or support. Many states
will imply an agreement from the parties’ behavior.
5) Finality of property division award
a) A property division award (whether it results from judicial decision or a divorce settlement agreement) may not be modified. (A support order may be modified.)
