Equitable Distribution of Property

When there is little or no marital property, no children, no issues of alimony or spousal maintenance, amicable spouses can usually obtain a quick divorce. Most divorces, however, are quite different and far more complex. The typical divorce involves a union of many years with considerable marital property, both personal property and real estate, children, family businesses, large or concealed debts, trust funds, real estate in other states, joint and separate accounts, investments, insurance, pensions, and other assets. There are tax ramifications that need to be considered. In these complex situations, the parties often cannot divide their property on their own and therefore require the assistance of experts to assist in the division of property.

Property

The first dispute in contested cases is what constitutes marital assets. All assets acquired between the date of the marriage and the date the divorce complaint is filed are subject to equitable distribution. All debts incurred during marriage, are also subject to equitable distribution.

Property that may not be subject to equitable distribution include:

• Gifts and inheritances given just to that spouse;
• Personal injury awards received by that spouse;
• Proceeds of a pension that vested before marriage;
• Properties purchased with the separate funds of a spouse remain that spouse’s separate property; and/or
• A business owned by one spouse before the marriage remains his or her separate property during the marriage, although a portion of it may be subject to equitable distribution if the business increased in value during the marriage or both spouses worked at it.

Conflict may arise when separate property is mixed together with marital property. Sometimes, one spouse may be able to identify which portion of the property is separate. One example of this is when a house is owned before marriage and continuing mortgage payments are made throughout the marriage. Otherwise if the separate property becomes mixed with the community property, and the two cannot be distinguished, the entire thing becomes community property.

The only way to avoid equitable distribution of assets acquired during the marriage is through the use of a qualifying prenuptial agreement.

Property to Be Divided

Certain kinds of property continue to create controversy during a divorce. Divorcing couples need to be aware of these assets and the issues their division may present.

• Marital Home. The primary residential property owned by the divorcing couple is often the marriage’s largest asset. Dealing with its division can be complicated, particularly when there are children involved. Courts often favor allowing the custodial parent to retain the home. Doing so may require complicated arrangements to ensure that the spouse who leaves receives adequate compensation for the home’s value as well as provisions for ongoing mortgage payments, tax liabilities and upkeep of the home. When these issues cannot be resolved, the couple may be forced to sell the home and split the proceeds.
• Pensions. Pensions often follow the family home as the second largest marital asset. When there are other income sources sufficient to compensate the non-pension holder, courts may leave vested pension rights in the spouse who earned it. Otherwise, under a federal law that makes division of pensions easier, a court in a divorce case may enter a Qualified Domestic Relations Order (QDRO) requiring the administrator of the pension to make payment to both the worker and their former spouse.
• Family Owned Businesses. When couples work together in a family owned business, equitable distribution of the business presents complex allocation and valuation problems. First, the couple or the court must decide who gets the business. Then, there must be a determination of its worth, which can require costly evaluation by outside experts (forensic accountants). As with family homes, if there are not enough marital assets to adequately compensate the non-retaining spouse, there may be the necessity of a forced sale or long-term buy-out.

Conclusion

Many couples have a difficult time reaching an agreement about how to divide their property.