Division of Property and Debt
If you’re getting divorced, you’re probably concerned about how to divide your assets and liabilities. When you’re trying to arrive at a settlement, it’s always best to consider what a court would do in the absence of an agreement. We can help you at the Law Offices of Edward A. Brown, P.A. with all of these complex issues.
The court is supposed to set aside to each party their non-marital property, and then divide the marital property between them “equitably”. A lot of people assume this means a 50-50 division, but that is not necessarily the case. What’s “equitable” means what is fair, under all the circumstances.
What Is Marital Property?
This brings us to the circular definition of marital versus non-marital property. Property acquired before the marriage, or by gift or inheritance to one party alone during the marriage is non-marital property. Anything else acquired during the marriage is presumed to be marital property, which is subject to equitable division by the court. It doesn’t matter whose name it’s in, or who earned the money to pay for it, If an asset was acquired during the marriage it can generally be allocated to either party, or split between them.
It is easy to transmute certain types of non-marital property to marital property. Real Estate comes to mind. Where one party has started buying a piece of property before the marriage, for example, and holds the deed and mortgage in their own name, things change when they get married. After that point, they will be accumulating marital property as they pay down the mortgage debt and increase the net value of what is usually a home. Also, as often happens, if the home is refinanced, or otherwise transferred into joint names, that makes the entire thing marital property. It is deemed to be “a gift to the marital estate.”
A similar thing can happen to bank accounts, and other intangible assets. Co-mingling of separate bank accounts can result in the creation of marital property.
Growth in stock accounts can be either marital or non-marital, depending upon how actively they are managed during the marriage.
The Value Of Retirement Accounts
Retirement accounts are often the most valuable property that a couple may own. These include tax deferred savings plans, such as IRAs and 401(k)s, and the more traditional pensions, or defined benefit plans. Generally speaking, the court can split the marital portion of any kind of retirement account between the parties , without incurring any tax consequences. You will pay taxes later, of course, if you try to cash out the account or otherwise take distributions from it.
Stock options may also be marital property, when they are given to a party during the marriage for work performed during the marriage. These can be difficult to deal with, as they often do not mature for years into the future. Nevertheless, these may be allocated between the parties by the divorce court.
Almost everybody has some tangible personal property (things you can touch, like furniture and vehicles) and that, too, must be allocated between the parties in the divorce. It is to be hoped and desired that the parties can do this between themselves (and their lawyers) without involving the court. There is no quicker way to get a judge frustrated with your lawyer than to be fighting over the pots and pans or, better yet, the Tupperware.
Debt, Too, Must Be Divided
Division of debt is treated in a similar manner to division of assets. It may not be “fair” (equitable) to allocate debt equally between parties who have different earning capacities. Ordering one person to pay down more of the debt can also serve as a substitute for spousal support.
Which brings us to one of the tricky facts about divorce cases: property that might ordinarily have to stay with one party as their separate, non-marital property may be ordered paid to the other as spousal support! What is given with one hand can be taken away with the other.
If you have substantial assets or debt or a complicated marital estate, you should have an experienced divorce attorney advise you.
Call Today For Assistance
Give us a call at 207-622-6900 if you need assistance with property division matters. You can also send us an email to get started.