Division Of Property
If you are facing a divorce, you probably have many questions about how your property will be divided. Following are answers to commonly asked questions regarding property division incident to divorce.
The information on this page is not, nor is it intended to be, legal advice. For answers to all of your property division and divorce questions, contact the attorneys at Duff & Kronfeld, P.C. by sending us an email or calling us today at 703-591-7475.
Frequently Asked Questions
- What is “Equitable Distribution”, and how does it work?
- How is “fairness” decided?
- What is considered “marital” property?
- What is considered “separate” property?
- Can property be “part-marital” and “part-separate?”
- Can my spouse obtain a portion of an inheritance that I previously received?
- Will my spouse be required to pay some of the debt created during our marriage, even if it is in my sole name?
- Do I have any right to share in my spouse’s military retirement, or government pension?
- Am I entitled to share in the stock options awarded to my spouse by his/her employer?
- My spouse has been granted stock in the company he/she works for. Am I entitled to any of this stock?
- My spouse started a business while we were married. Am I entitled to share in the profits of this business?
Q. What is “Equitable Distribution”, and how does it work?
A. “Equitable Distribution” is the process adopted in Virginia whereby assets acquired by the parties during their marriage are divided. This division can occur by way of a property settlement agreement between the divorcing spouses, or by a judge as part of a divorce / equitable distribution trial. Under either scenario, the procedure is the same, i.e., identify and value all marital property interests, and divide them between the parties in a manner that is fair. Of course, what is considered as being “fair” is often the subject of heated litigation; and, unless the two divorcing spouses can agree on what sort of division is fair, a judge will ultimately have to decide.
Q. How is “fairness” decided?
A. A. Initially, it must be understood that property division in Virginia is not equal distribution, but rather, equitable distribution. The controlling statute sets forth a series of factors which are to be considered by a divorce judge in arriving at a “fair” division of the marital property. These factors include the following:
- The monetary contributions, both positive and negative, made by each party towards the well-being of the family, and towards the acquisition/maintenance of the assets;
- The “non-monetary” contributions, both positive and negative, made by each party towards the well-being of the family, and towards the acquisitions/maintenance of the assets;
- Reason(s) for the breakup of the marriage;
- Respective ages and physical/mental health of the parties;
- Existing debts of each party; and
- Any waste, or improper use, of marital assets.
Based upon the evidence that is presented by the two parties on the above and other factors, the trial judge will decide what sort of property division is “fair.”
Q. What is considered “marital” property?
A. Any asset that is purchased or otherwise acquired after the date of marriage and before the date of separation is classified by the court as “marital” property. This will, obviously, include such assets as vehicles, real estate and money; however, it also includes assets which are not quite as obvious, such as interest in retirement plans, ownership of a business, stock and stock options, deferred compensation, and more. Virginia law provides that both spouses have an interest in all “marital” property, regardless of the manner by which legal title to the property is held.
Q. What is considered “separate” property?
A. Any asset that either spouse owned before the date of marriage, or is acquired by either spouse after the date of separation, is classified by the court as “separate” property. In addition, any money or assets that are inherited by either spouse during the marriage will be classified as “separate” property, PROVIDED that the inheritance is maintained as a separate asset, meaning that there has been no re-titling to the joint names of both spouses or commingling with marital funds, or other similar assets. Lastly, “separate” property also includes assets (generally money) that are gifted to one spouse during the marriage or by someone other than the other spouse. Gifts between spouses will be classified as “marital” property. Assets that fall under the category of “separate” property cannot be divided by the court in equitable distribution.
Q. Can property be “part-marital” and “part-separate?”
A. Yes. Often a particular asset may be a hybrid of “separate” and “marital” property. When this occurs, one spouse will be required to trace his or her contribution of “separate” property into the acquisition of “marital” property, or vice versa. Such a situation frequently occurs when one spouse sells a premarital home (“separate” asset), or uses his or her inherited funds (“separate” asset) towards the purchase of a marital home.
Q. Can my spouse obtain a portion of an inheritance that I previously received?
A. Money and other assets received as an inheritance are classified as “separate” property, which belong solely to the spouse who received the inheritance. Accordingly, the other spouse has no claim, or right, to any portion of such inheritance. However, there is one provision, namely, that the receiving spouse does nothing to make the inherited funds or assets “marital” property. Conduct to avoid would include:
- Depositing inherited money into a jointly-titled bank account;
- Titling assets into joint names; or
- Co-mingling “marital” money with the inherited money.
The key is: If you treat the inheritance as your “separate” property, then a divorce court will do the same.
Q. Will my spouse be required to pay some of the debt created during our marriage, even if it is in my sole name?
A. Debt is regarded by the court as akin to a “negative asset,” and the court will divide all debt existing as of the date of separation in the same manner as it will divide property, i.e., “fairly.” Title to a particular debt, such as a credit card account, is essentially meaningless, as the court is far more concerned with the question: Who benefited from the debt? Therefore, the wife can probably expect to be allotted the debt associated with the purchase of a pair of Jimmy Choo shoes, and the husband can expect to be allotted the debt incurred in the purchase of a new set of golf clubs; but, charges resulting from a family vacation will be treated as “marital,” and divided between the parties in a fair, or equitable, manner.
Q. Do I have any right to share in my spouse’s military retirement, or government pension?
A. Absolutely. The amount of “credit” earned by a spouse, from the date of marriage to the date of separation, is classified as “marital” property, and will be divided by a divorce court “fairly”. It must be understood, however, that any time spent by a spouse in the military or with the government before marriage or after separation remains that spouse’s “separate” property, and is not susceptible to division by a judge. Accordingly, it is quite common to be confronted with a pension that is “part-marital” and “part-separate.” For this reason, divorce courts will often divide military and governmental pensions based upon the following formula:
Months/years married and in service
————————————————– x 50 %
Total months/years in service
Q. Am I entitled to share in the stock options awarded to my spouse by his/her employer?
A. Recognizing the overriding principle that any asset acquired by a party after the date of marriage is presumed to be “marital” property, then any stock options that are awarded to one spouse after marriage will be classified as “marital” and divided “fairly.” However, the difficulty with stock options lies in the “valuation” of such options, since they have not yet been “exercised” or “turned into money.” Furthermore, when the options are exercised, the resultant profit is taxed by the IRS to the spouse exercising the same. Therefore, the issue of stock options is most often resolved, either through the parties’ agreement or by a divorce court, by granting the non-owning spouse a “fair” portion of the net, after-tax proceeds realized by the owning-spouse once such options are exercised.
Q. My spouse has been granted stock in the company he/she works for. Am I entitled to any of this stock?
A. Larger companies often compensate employees with a grant of stock in the company. Frequently, however, the spouse’s actual ownership of such stock develops over a period of years, referred to as “vesting schedule.” It is common to see vesting schedules of three, five, even seven years. Consequently, some portion of the stock may become owned, or vested, before marriage or after separation, which makes the stock “part-marital” and “part-separate.” The non-owning spouse is entitled to share in the “part-marital” portion of the stock.
Q. My spouse started a business while we were married. Am I entitled to share in the profits of this business?
A. A non-owning spouse will not be entitled to receive a direct share of profits generated by a business that is owned by the other spouse, even though the business was established during the marriage. However, the non-owning spouse is entitled to be paid by the owning spouse a portion of the intrinsic value of that business. This concept of intrinsic value can often be complex, and virtually always requires a professional evaluation of the business. Essentially, any goodwill of the business that has been developed during the course of the marriage is classified as “marital” property, and will be divided “fairly” by a divorce court.
These FAQs are not intended to answer all of your questions. For more information, call 703-591-7475 to speak with a lawyer at Duff & Kronfeld, P.C. in Fairfax today.