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Flashcards in 4 - financial matters on divorce Deck (33)
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1

financial matters on divorce

property division, alimony, marital Ks, rights of unmarried persons

2

financial matters on divorce
property division

general principles
separate property
marital property
special issues in classification of property
equitable division

3

financial matters on divorce
property division
general principles

3 approaches to dividing property at divorce
Property distribution decrees are not modifiable
2-step process in property division

4

financial matters on divorce
property division
general principles
3 approaches to dividing property at divorce

1. community property - all property acquired during marriage is owned 1/2 by each spouse, and property owned before marriage is separate
2. Equitable division of all property owned by either spouse
3. Equitable division of marital property - each spouse takes his separate property, and the property acquired during marriage is divided equitably. (MOST POPULAR)

5

financial matters on divorce
property division
general principles
Property distribution decrees are not modifiable

Property distribution decrees are not modifiable.
Compare to support awards, which are subject to modification.

6

financial matters on divorce
property division
general principles
2-step process in property division

CLASSIFICATION, then DIVISION
1. Classification: determine what is MARITAL property and what is SEPARATE property
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".

7

financial matters on divorce
property division
separate property

Separate property includes
1. All real AND personal property owned by a spouse BEFORE marriage, including assets held in individual retirement accounts
2. Property acquired by a spouse AT ANY TIME by gift, bequest, devise, or descent
3. Property acquired in exchange for property acquired before the marriage
4. Income from and appreciate of separate property (but look to special issues)
5. Personal injury damages (pain & suffering awards, victim of crime compensation awards, future medical expenses, future lost wages)
6. Property acquired by a spouse AFTER an order of legal separation where the court has made a final disposition of property

8

financial matters on divorce
property division
marital property

Marital property includes:
1. All property acquired by either or both spouses during the marriage up to the final divorce decree
2. Includes value of vested and unvested pension, vested and unvested stock option rights, retirement or other fringe benefit rights relating to employment that accrued during the period of the marriage
3. Includes recovery in personal injury, workers' comp, social security disability actions, other similar actions for wages lost during the marriage, reimbursement for medical bills incurred and paid w/marital property, property damage to marital property

9

financial matters on divorce
property division
special issues

commingling
transmutation of separate property
improvement of separate property
property acquired before marriage but paid for after marriage
pensions
professional license or degree
tax consequences

10

financial matters on divorce
property division
special issues
commingling

Separate property can become marital if the property is inextricably intertwined.
Courts will attempt to trace property if possible.

11

financial matters on divorce
property division
special issues
transmutation of separate property

Separate property can become marital based on the intent of the parties.
(i.e. H s/s money is used as down pmt for couple's home titled in both names)

12

financial matters on divorce
property division
special issues
improvement of separate property

When separate property is improved by use of marital funds OR the efforts of the non-owning spouse, courts in most jdx will grant the marital estate or non-owning spouse reimbursement for the value added.
Active efforts or marital funds = probably marital
Passive efforts and no marital funds = probably separate

13

financial matters on divorce
property division
special issues
property acquired before marriage but paid for after marriage

Majority: Property should be apportioned between separate and marital estates in proportion to the contribution of separate and marital funds to pay for the property.
But courts are split.

14

financial matters on divorce
property division
special issues
pensions

Pensions are considered to be marital property subject to division, even if the non-working spouse did not contribute.
Courts use different formulas to calculate the share of the pension that was earned by the party during the marriage and the amount subject to division.

15

financial matters on divorce
property division
special issues
professional license or degree

Professional license or degree is NOT considered to be marital property subject to division.
To avoid unfairness, some jdx consider it when awarding alimony.
A minority of jdx value the degre, then award more property or alimony to the other spouse based on the valuation.

16

financial matters on divorce
property division
special issues
tax consequences

Property division is NOT a taxable event.
(Alimony is a taxable event.)

17

financial matters on divorce
property division
equitable division

Once the court identifies and values the marital property, the court will make an equitable division (not necessarily equal).
Court's division of the property is NOT subject to modification once the divorce is final.
Look at facts in fact pattern on making equitable division.
Courts can divide property in kind or by contribution.

18

financial matters on divorce
alimony

general principles
types of alimony (spousal support/maintenance)
factors to be considered when awarding alimony
2 primary considerations when awarding alimony
modification of spousal support
termination of spousal support
tax consequences of spousal support

19

financial matters on divorce
alimony
general principles

1. Alimony - payment paid to the economically dependent spouse
2. 4 types of alimony - courts can award more than 1 type
3. Trend to award less money than in the past b/c of the 2 earning households and less economic dependence
4. Trial court is vested w/GREAT DISCRETION in awarding support

20

financial matters on divorce
alimony
types of alimony

1. Permanent periodic support
2. Lump sum support
3. Rehabilitative support
4. Reimbursement support

21

financial matters on divorce
alimony
types of alimony
permanent periodic support

permanent periodic support
Example: $2,000/month until death or remarriage
Duration: infinite
Modification: Can be increased, decreased, or terminated upon proof of substantial change of circumstances

22

financial matters on divorce
alimony
types of alimony
lump sum support

lump sum support
Example: $36K paid @ $1K/month for 36 months
Duration: Specified period of time or lump sum
Modification: NONE - treated like K right; binding on payor's estate

23

financial matters on divorce
alimony
types of alimony
rehabilitative support

rehabilitative support
Example: $1000/month for 36 months to gain education or skills
Duration: Specified period of time (unless modified by court)
Modification: Can be increased, decreased, or terminated upon proof of substantial change of circumstances
Note: Designed to restore disadvantaged spouse's earning capacity to the point that (s)he is no longer economically disadvantaged relative to the other spouse

24

financial matters on divorce
alimony
types of alimony
reimbursement support

reimbursement support
Example: $20K as repayment for supporting spouse's contribution to increased education provided to the other spouse
Duration: Specified period of time or lump sum
Modification: NONE - treated like K right; binding on payor's estate. Can be awarded even if supporting spouse is not otherwise eligible for spousal support.

25

financial matters on divorce
alimony
factors to consider when awarding alimony

standard of living during the marriage
duration of the marriage
age/physical/emotional conditions of the parties
financial resources of EACH party (consider marital prop/separate prop/whether the party receives child support)
the contribution of each party to the marriage, including homemaking, childcare, education, and career building of the other party
time needed to obtain education or training to enable either party to find appropriate employment where applicable
ability of payor spouse to meet his needs and pay support
Some courts may consider marital fault.

26

financial matters on divorce
alimony
2 primary considerations when awarding alimony

1. Needs of the claimant spouse
2. Ability of the payor spouse to pay

27

financial matters on divorce
alimony
modification of spousal support

1. Spousal support is modifiable based on SUBSTANTIAL AND MATERIAL CHANGE OF CIRCUMSTANCE affecting the needs of the recipient spouse or the ability of the other spouse to pay.
2. Generally, a VOLUNTARY reduction in income will not be sufficient to reduce the obligation. (prison, leaving job) Some courts will consider new legal obligations to another spouse or children in modifying spousal support.

28

financial matters on divorce
alimony
termination of spousal support

Periodic payments generally terminate upon:
1. Remarriage of the recipient
2. Death of either spouse
3. In some jdx, the cohabitation with another person
Lump sum awards survive death and are not modifiable.

29

financial matters on divorce
alimony
tax consequences of spousal support

Generally, spousal support IS includable in the income of the recipient and deductible by the payor (unless otherwise provided by agreement)
Compare to property division which has no tax effect.

30

financial matters on divorce
marital Ks

Premarital AGRs (see before marriage)
Separation AGRs