PROPERTY DIVISION

Question 1

Approaches to Property Division

Answer 1

• 3 approaches to division of property upon divorce are:
  (1) Community property: All property acquired during marriage is deemed owned one-half by each spouse, & all property brought into marriage/acquired by gift/ bequest is separate property
  (2) Equitable division of all property: ct divides all
  property owned by either spouse, whether acquired before/after marriage
  (3) Equitable division of marital property: Each spouse
  takes their separate property, & ct only divides property acquired during marriage
• 3rd approach is most common & is addressed in
  this module.

Question 2

Two-Step Process

Answer 2

• 2-step process in property division:
  (1) Classification: Determine what is marital property & what is separate
  (2) Division: Make an equitable division of the marital estate no matter how the property is titled
• Note: Equitable division does not necessarily mean equal.
• Property distribution decrees are not modifiable.

Question 3

SEPARATE PROPERTY

Answer 3

• Generally, in a divorce, each spouse takes their separate property.
• Separate property includes:
  (1) Property owned before marriage
  (2) Property acquired by gift/inheritance
  (3) Property acquired in exchange for separate property
  (4) Income & appreciation of separate property (but see Improvement of Separate Property)
  (5) Pain & suffering awards
  (6) Personal damages (ex. future medical expenses/ future lost wages)
  (7) Property acquired after an order of legal separation that includes a final disposition of property

Question 4

MARITAL PROPERTY

Answer 4

• Marital property is all other property acquired during the marriage.
• Some jurisdictions use date of separation as end of marital estate, & others use date of filing for divorce.
• Marital property includes:
  (1) Property acquired during marriage
  (2) Earnings
  (3) Employment Benefits, Pensions, & Stock Options
• Majority rule: employment benefits, stock
  options, & pension rights (see below) earned during
  marriage are marital property even if they will not be exercised/vested until after divorce.
  (4) Lost Wages
• Many states hold that if a COA for lost wages due to personal injury accrues between date of marriage & final separation, then proceeds from settlement/ award are marital assets subject to distribution.
  (5) Reimbursement for medical bills incurred & paid w/ marital property
  (6) Recovery for Damages to Marital Property
• Marital property is subject to equitable distribution by ct.

Question 5

SPECIAL ISSUES IN CLASSIFICATION OF
PROPERTY: Property that Changes Character

Answer 5

• Separate property may become marital property through either:
  (1) Commingling: separate property is intertwined w/ marital property/ w/ separate property of other spouse to extent that it can no longer be traced
  (2) Transmutation: separate property is treated in a way that shows an intention for property to be marital property (ex. placing separate property in names of both spouses)

Question 6

Improvement of Separate Property

Answer 6

• When separate property is improved by use of marital funds/effort of a spouse, cts generally hold that property remains separate property, but most jurisdictions grant marital estate/nonowning spouse
  reimbursement for value added to separate property.
• An increase in value due to market factors would remain separate property.

Question 7

Property Acquired Before Marriage But Paid
for After

Answer 7

• Majority view: property should be apportioned between separate & marital estates in proportion to contribution of separate & marital funds to pay for property.
• Other states focus on inception of title & allow a reimbursement remedy.

Question 8

Pensions

Answer 8

• The portion of a pension earned during a marriage is marital property subject to distribution.
• Cts use different formulas to calculate the share of pension that was earned by party during marriage & amount will be subject to division.
• Some cts will give non-earning spouse other funds from marital estate to offset amount of pension plan.

Question 9

Tax Consequences of Property Division

Answer 9

Property division is not considered a taxable event.

Question 10

EQUITABLE DIVISION

Answer 10

• Once ct identifies & values marital property, ct will make an equitable–not necessarily equal–division.
• Remember, trial ct is given a great deal of discretion, & ct’s division of property is not subject to modification once divorce is final
• Factors considered in dividing property include:
  (1) Age, education, background, & earning capabilities
  of both parties
  (2) Duration of marriage, & whether there were any prior marriages
  (3) Standard of living during marriage
  (4) Present incomes of both parties, their vocational
  skills, & employability
  (5) Source of money used to purchase property
  (6) Health of parties
  (7) Assets, debts, & liabilities of parties
  (8) Needs of parties
  (9) Child custody provisions
  (10) Whether distribution is in addition to, or in lieu of, alimony
  (11) Each party’s opportunity to acquire future income & assets
  (12) Each party’s contribution to acquisition/ enhancement of existing marital assets
  (13) Each party’s contribution as a homemaker to family unit
  (14) Economic fault (whether either party has dissipated marital property)
• Note: Marital fault is generally not a consideration (but it can be in some states).
• Cts can divide property in kind (actually dividing assets) or by contribution (awarding assets to one spouse & money to the other).