Property Division at Divorce Flashcards
Equitable Distribution
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.
Does Fault Play a Role in Property Division?
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.
Steps in Judicial Division of Property
Step 1 –> Identify the divisible property
Step 2 –> Value it
Step 3 –> Divide it
Dual Classification: Marital Property v. Separate Property
- 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
Determining if Something is Separate or Marital Property (Timing)
- 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.
Marital Property Presumption
- 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.
Increased Value of Separate Property
Whether it is divisible will depend on the reason for the increase in value: passive v. labor
Passive Appreciation of Separate Property
Remains separate property.
Appreciation from Labor During Marriage
Becomes marital property to which both parties have a claim
Things that are Generally Considered Separate Property
- Property acquired by gift or inheritance
- Property excluded by valid agreement of the parties; or
- Property acquired prior to marriage or post-separation.
The Date Signifying the End of the Joint Acquisition Period May Vary
- Date of separation;
- Date divorce is filed;
- Date of the hearing; or
- Date of decree of divorce
Commingled or Transmuted Property (Ways Courts Handle It)
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.
Actual Division of Property
Division is based on what is fair under the circumstances, not necessarily 50/50.
Important Factors that May Generally Be Considered in Determining What Division Would Be “Equitable” Center on Two Concepts
- 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)
Pensions and Other Retirement Accounts
Pension and retirement benefits accumulated by either spouse during the marriage are subject to equitable distribution, whether the accounts are vested or unvested.
Stock Options
- 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.
When a Stock Option is Granted
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))
What About Personal Injury Claims?
- 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.
Division of Debts
Debts incurred during marriage are marital debts, while those incurred before or after are separate debts of the spouse who incurred them.
Professional Degree/License
Most states hold that a professional degree or license, is not property subject to equitable distribution.
