Property Division at Divorce

Question 1

Equitable Distribution

Answer 1

Adopted by most states. Allows a court to take into account numerous factors related to the financial situation of each spouse, rather than presuming a 50/50 split.

Question 2

Does Fault Play a Role in Property Division?

Answer 2

Under modern law, fault has been eliminated from consideration in property distribution in many states, at least with respect to matters that are not related to the parties’ finances.

Question 3

Steps in Judicial Division of Property

Answer 3

Step 1 –> Identify the divisible property

Step 2 –> Value it

Step 3 –> Divide it

Question 4

Dual Classification: Marital Property v. Separate Property

Answer 4

• Marital property- is jointly owned and jointly acquired through the labor of the parties
• Separate property- is owned only by the person who holds title

Question 5

Determining if Something is Separate or Marital Property (Timing)

Answer 5

• Property owned before marriage, acquired after dissolution of the marriage, or acquired by gift or inheritance to one spouse during the marriage, is that spouse’s SP
• Property acquired during the marriage is presumed to be marital property.

Question 6

Marital Property Presumption

Answer 6

• As long as property is coming into the marriage during the marriage, it is MP. Burden is on the party trying to prove that the property is separate.
• The earnings of each spouse, along with property acquired with those earnings or through the labor of a spouse are presumptively considered marital property.

Question 7

Increased Value of Separate Property

Answer 7

Whether it is divisible will depend on the reason for the increase in value: passive v. labor

Question 8

Passive Appreciation of Separate Property

Answer 8

Remains separate property.

Question 9

Appreciation from Labor During Marriage

Answer 9

Becomes marital property to which both parties have a claim

Question 10

Things that are Generally Considered Separate Property

Answer 10

• Property acquired by gift or inheritance
• Property excluded by valid agreement of the parties; or
• Property acquired prior to marriage or post-separation.

Question 11

The Date Signifying the End of the Joint Acquisition Period May Vary

Answer 11

• Date of separation;
• Date divorce is filed;
• Date of the hearing; or
• Date of decree of divorce

Question 12

Commingled or Transmuted Property (Ways Courts Handle It)

Answer 12

Courts can handle such property in a variety of ways:

• if SP can be traced –> treat as part SP and part MP
• if tracing is not possible –> separate property can transform into MP
• treat it as a gift if intended as such, so it would be marital property.

Question 13

Actual Division of Property

Answer 13

Division is based on what is fair under the circumstances, not necessarily 50/50.

Question 14

Important Factors that May Generally Be Considered in Determining What Division Would Be “Equitable” Center on Two Concepts

Answer 14

• Financial status or need of the parties (income, earning capacity, separate wealth, inheritance)
• Contribution (financial, non-financial including at-home parent, care-giving parent, education, acquisition or property, and dissipation of assets)

Question 15

Pensions and Other Retirement Accounts

Answer 15

Pension and retirement benefits accumulated by either spouse during the marriage are subject to equitable distribution, whether the accounts are vested or unvested.

Question 16

Stock Options

Answer 16

• Acquired either spouse during the marriage whether vested or non-vested and whether or not their value is ascertainable, are presumed to be marital property.
• However, if stock options are earned as employment compensation, their status as marital or non-marital property depends on when acquired and whether the work for which the options are compensation was performed during the marriage.

Question 17

When a Stock Option is Granted

Answer 17

A vested employee stock option is acquired when granted, but an unvested employee stock option is more complicated (most states apply a time rule formula (look at when option vests and whether spouses were living together as a marital unit during this time))

Question 18

What About Personal Injury Claims?

Answer 18

• Lost wages- to the extent the damages replace lost wages that would have been earned during marriage or medical expenses that were incurred during marriage –> those damages are marital property
• Future wages- to the extent the damages replace future wages or future medical expenses, those damages are SP of the injured spouse.

Question 19

Division of Debts

Answer 19

Debts incurred during marriage are marital debts, while those incurred before or after are separate debts of the spouse who incurred them.

Question 20

Professional Degree/License

Answer 20

Most states hold that a professional degree or license, is not property subject to equitable distribution.