How do we separate our property when we get divorced?
You may have heard about some states that have a 50/50 rule that simply just splits the property in half. Virginia uses a different rule called “Equitable Distribution.” This means that the court may look at the assets of your marriage as separate (owned by one spouse or the other), marital (shared), or some combination of the two. The process takes into consideration who worked outside the home, inside the home (ie – raising children while the other spouse worked), and what each spouse provided during the marriage. This may result in a 50/50 split, but often is nuanced beyond percentages.
Does the Court ever divide property at the pendente lite hearing?
No, but at the pendente lite hearing, often the Court will rule that the spouses have to preserve the property pending the final divorce (e.g. you can’t go cash out your 401K and spend it). The court puts the parties on notice to avoid marital waste, or deliberately spending marital resources on things to the benefit of only one spouse. The final ruling about property separation is made at the final hearing.
If I have a good lawyer, can I “take my spouse for every penny” and make sure he or she suffers financially?
No, and it is not a good idea to think this way. The assets are ultimately going to be divided according to the requirements of the Virginia Code for equitable distribution. If you can agree on who gets what property, you will save yourself thousands in attorneys’ fees. When we represent people in divorce, we always explain that every dollar you are spending on attorneys is one less dollar there is to separate between you and your spouse – or to go toward your kids. For example, if you have $100,000 in assets and think that you should get $60,000 and your spouse should get $40,000, then why would you want to spend $20,000 in attorney’s fees for the chance of getting a judge to agree with you? If you won, you would get $60,000 but you would have spent $20,000 to get it – thus putting only $40,000 in your pocket. So why not just “plug your nose” and agree to get $50,000? That way, you are guaranteed to get $10,000 more than you would if you went to trial on the property separation issue. While we thrill in vigorous litigation and advocacy for our clients, we are keen to “run the numbers” and keep our clients informed of realistic goals.
What if we agree on how our property is to be separated?
Great! The you are both reasonable, and have found the secret to an uncontested and inexpensive divorce. If you and your spouse agree to how the property is to be separated, then in 99% of the cases, the Judge will do just as you agreed with a smile.
What if we disagree on how our property is to be separated?
If you disagree, then at the property separation hearing, you present your side, your spouse presents his/her side, and the Judge then divides the property between you at the final divorce. While “equitable distribution” is supposed to be based on “what is fair”, over the years, it has become a quite mechanical process. AT its most basic level, the Court gives each spouse their own separate property (e.g. property they brought into the marriage) and then splits the marital property (e.g. the property they acquired during the marriage) based upon what is “equitable.”
How do we decide what our property is worth?
Often there is a question on what property is worth. For example, one spouse who is not going to live in the home and wants ½ of the equity may say the house is worth $600,000, while the spouse who intends upon staying may say the house is only worth $500,000. In these cases, the attorneys undergo a process of valuation and classification of the property. The property is valued as of the date of the hearing or, if one spouse wants a different date, they can ask that the date of value be based on a date at least 21 days earlier. You determine what it is worth in the same way you would in a business deal. To value a house, you would have to hire an expert real estate appraiser. For a 401K, you would use the stock values. For a car, you may use Kelly Blue book. It can be a painstaking process.
What is separate property?
This is all property that belongs to one person, not both. Property that only one person owns includes property from before the marriage and property given specifically to one person as a gift or in a will. It also includes property that one person bought during the marriage using other separate property and which they kept as separate property. Income from that separate property received either directly as income or as an increase in value is also counted as separate property if the other spouse who doesn’t own the property didn’t influence the change in value. If you have a premarital agreement, separate property is usually spelled out in advance of marriage.
What is marital property?
This property titled to both parties, or is part of a property that is titled to both. Property which was acquired during the marriage and doesn’t qualify as separate property is marital property. Good examples of marital property are houses purchased during the marriage, pensions, profit-sharing or deferred compensation or retirement plans earned during the marriage. Marital property is assumed to be jointly owned, unless there is proof that it is not.
What is hybrid property?
This is often property that, (depending on evidence), can be either marital or separate property. To simplify:
- If the increase in value of separate property is directly related to the other spouse or the addition of marital property, the increase in value is marital property. However, the person who does not own the property has to prove that the increase in value was directly related to their contribution or the marital property. If this cannot be proven, the increase in value is still separate property.
- If the separate property was combined with marital property and can be easily indentified, the separate property retains the separate identification. However, if the property cannot be easily identified, the whole property becomes marital property.
- If separate property was retitled under both names, then it becomes marital property, unless there is evidence the original property can isolated, in which case it is separate property.
- Also, if one person’s separate property was combined with the other person’s separate property and it cannot be divided, then it is hybrid property and each person can be reimbursed the value of the original contribution.
This understanding of hybrid property applies to pensions, profit-sharing, deferred compensation plans or retirement benefits.
What if we disagree over whether the property is separate, marital or hybrid?
Once the property has been valued and classified, if either party disagrees with the classification on any of the properties, they are responsible for proving the property should have another classification. More information on property types is searchable in the Virginia Code.
How does the Court separate the Marital and Hybrid property?
After the valuation and classification, the court considers distribution. Here is where the “equitable” part of equitable distribution comes into play. There are several factors the court considers, including the contributions of both people to caring for the family and the property. The court also looks at the marriage, including how long the marriage lasted and the contributing factors which led to the divorce. The court looks at both parties including their age, physical and mental condition, debts and liabilities and the reasons behind them. The court also considers the tax consequences to each person. In addition, it will look at how and when the marital property was acquired and how liquid that property is. If either spouse used or sold marital property by themselves in preparation for the divorce or separation, the court may take that into consideration as well as any other factors that the court feels are necessary to consider. Once these decisions are reached, distribution is made by the sale or division of jointly owned property, and in the form of monetary awards.