Distribution of Property: The Basics
When you are facing the prospect of an impending divorce, you might have significant concerns about the future. The process of dividing your property and debts can have a dramatic impact on your financial security and standard of living during and after your divorce. While there are many complex issues involved in the equitable distribution of property under Virginia law, this blog provides some basic information that everyone considering or involved in the divorce process should understand.
Distribution of Property: Distinguishing Marital and Separate Property
The most fundamental distinction that must be understood in terms of the division of assets and debts during a divorce involves the difference between marital and separate property. Generally, marital property includes assets and debts acquired or earned during marriage. Exceptions to this general rule that constitutes separate property include:
- Gifts to one spouse from a third-party during the marriage
- Appreciation in the value of separate property during marriage
- Property and assets acquired and earned during marriage
- Inheritance of either spouse during marriage
Factors Virginia Courts Use When Determining an Equitable Distribution
While spouses generally keep their separate property, Virginia courts will attempt to determine an “equitable distribution” of marital property. The term “equitable distribution” essentially refers to a “fair” though not necessarily equal division of marital property. The court will consider a range of factors when determining an equitable distribution, which include the following under Virginia law:
- Debts of both spouses
- The manner and date the asset was acquired
- Contribution of either spouse to the family
- The degree to which either spouse used or spent marital property for the divorce
- Relative age and health of each spouse
- Tax consequences of the proposed distribution of assets
- Liquid or non-liquid nature of marital assets
- Contribution of either spouse in acquiring or maintaining assets
- Duration of the marriage
- Reasons for the divorce
Distribution of Property: Value of Real and Personal Property
The parties to a divorce can reach an agreement regarding the distribution of property in a marriage, often referred to as a “separation agreement.” If this effort fails, the court will engage in a number of tasks when determining how property should be divided between spouses. Once an asset or debt has been designated as marital or separate, the value of the property must be ascertained. Usually, the court will engage in this process by determining the “fair market value” (FMV) of the asset. FMV refers to the price that could be received for the item on the open market today as opposed to the price paid when the asset was originally purchased. The value assigned to used items, such as household furniture will usually be akin to what the item would sale for at a “garage sale.” Kelly Blue Book might be used as a tool for determining the value of a car whereas similar homes that have recently sold in your area provide a basis for determining the value of your family home.
The valuation process can be much more difficult for certain types of assets. Collectibles, antiques, real property with special improvements, and stock options might necessitate using an appraiser or other appropriate expert. Experienced Virginia Beach divorce lawyers typically work with experts who can assist in evaluating difficult to value assets.
Distribution of Property: Complications Associated with Assets with Both Separate and Marital Property Components
Another challenge that makes it difficult to craft an appropriate distribution of assets involves assets that have a “mixed” character as both separate and marital property. The pension of a spouse provides a classic example. A spouse often will have started earning a pension prior to marriage, but contributions to the fund will continue during the marriage. Income (and income contributions to a pension) are separate property prior to marriage and after a marriage. However, they constitute marital property during the marriage, so the pension with contributions both during the marriage and before or after the marriage will have both a separate and marital property portion. The marital property portion of the pension is calculated based on a ratio of months of contributions during the marriage to months of contribution prior to and after the marriage.