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Property-in divorce
In divorce cases, how often do judges decide who gets what?
Judges rule on major contested issues in only a relatively small number of cases. As noted
earlier, probably more than 95 percent of divorce cases are not decided by the court. Instead,
the parties—often with help from attorneys—have reached an agreement between themselves
which they present a judge for approval. If the agreement is fair, approval usually is granted after
a short hearing.
Nonetheless, the rules of law that a judge would use to decide a contested case influence
the settlements that the parties reach. If it is predictable that a matter would be decided in a
certain way, it is seldom worth taking the issue to trial. In many cases, the cost of pursuing a
disputed property issue at trial will exceed the possible monetary gain of a victory in court.
How do judges decide disputed property issues?
Laws vary from state to state. As a starting point, many states allow parties to keep their
"nonmarital" or "separate" property. Nonmarital property includes property that a spouse
brought into the marriage and kept in his or her own name during the marriage. It also includes
inheritances received and kept separate during the marriage. It also may include gifts received by just one spouse during the marriage. Some states permit division of separate as well as marital property when parties divorce, but the origin of the property is considered when deciding who receives the property. After allocating separate property, the court divides marital or community property.
What is marital or community property?
Marital or community property is defined somewhat differently by different states, but it
generally includes property and income acquired during the marriage. Wages earned during the
marriage would be marital property. A home and furniture purchased during the marriage usually would be marital property.
What if the property obtained during the marriage is in the name of one party only?
That too usually will be marital property if it was paid for with marital funds such as wages.
For example, if a wife buys a car during the marriage and pays for it with her wages, the car is
marital property, even though it is in her name only. A pension also is usually marital property,
even though it may have been earned by the labor of only one spouse during the marriage. A
pension can be a very significant piece of property. The pension and the family home often are
the most valuable assets acquired by a couple during the marriage. (If a pension was completely
earned before the marriage, it probably would be nonmarital property.) Marital or community
property can be divided by the court between the parties.
How does a husband or wife keep nonmarital property separate and thus less likely
to be lost in a divorce?
The main way to keep nonmarital property separate is to keep it in one's own name and not
mix it with marital property. For example, if a wife came into a marriage with a $20,000 money
market account and wanted to keep it as nonmarital property, she should keep the account in
her own name and not deposit any marital funds in the account. She should not, for instance,
deposit her paychecks into the money market account, because the paychecks are marital funds
and the deposit could turn the whole account into marital property.
Another example: If a husband inherits some stock from his mother during the marriage
and he wants to keep it as nonmarital property, he should open his own investment account and
should not use the account for any investments that he and his wife own together.
If a husband or wife decides to use some nonmarital funds for a common purpose, such
as purchasing a home in joint tenancy, that money normally will become marital property. The
nonmarital property will be viewed by the courts of most states as a gift to the marriage. The
property distribution laws have many intricacies and variations between states; understanding
them usually requires a lawyer's help.
How do courts divide marital or community property?
A. Again, the answer varies from state to state. A few states, such as California, take a rather
simple approach. They believe property should be divided equally because they view marriage
as a joint undertaking in which both spouses are presumed to contribute equally, though often in
different ways, to the acquisition and preservation of property. All marital property will be
divided fifty-fifty, unless the husband and wife had a premarital agreement stating otherwise.
(Premarital agreements were discussed earlier in this chapter.) Most states, however, apply a
concept called "equitable distribution."
What is "equitable distribution"?
A. That means a court divides marital property as it thinks is fair. States applying principles of
equitable distribution also view marriage as a shared enterprise in which both spouses usually
contribute significantly to the acquisition and preservation of property. The division of property
could be fifty-fifty, sixty-forty, seventy-thirty, or even all for one spouse and nothing for the other
(although that would be very unusual). Under equitable distribution, courts consider a variety of
factors and need not weigh the factors equally. That permits more flexibility and more attention
to the financial situation of both spouses after the divorce. However, it also makes the resolution
of property issues less predictable. Here are some examples of factors that are considered by
states applying principles of equitable distribution.
(1) Nonmarital property. If one spouse has much more nonmarital property than the other,
that could be a basis for giving more marital property to the less wealthy
spouse.
(2) Earning power. If one spouse has more earning power than the other, that could be a basis
for giving more marital property to the spouse with less earning power.
(3) Who earned the property. That can be a factor favoring the party who worked hard to
acquire or maintain the property.
(4) Services as a homemaker. Courts recognize that keeping a home and raising children are
work. In addition, those services often enable the spouse who is working outside the home
to earn more money. Thus, services as a homemaker are a factor in favor of the
homemaker. Some courts also apply a related concept of considering whether one spouse
had impaired her or his earning capacity because of working as a homemaker. That factor
also would favor the homemaker-spouse.
(5) Waste and dissipation. If a spouse wasted money during the marriage, that could count
against him or her when it comes time to divide property. This factor is
sometimes labeled "economic fault," and may be considered even by
courts that do not consider other kinds of fault.
(6) Fault. Non-economic fault, such as spousal abuse or marital infidelity, is considered in some
states, but many states do not consider it relevant to property division.
(7) Duration of marriage. A longer marriage may be a factor in favor of a larger property
award to the spouse with less wealth or earning power.
(8) Age and health of parties. If one spouse has ill health or is significantly older than the other,
that factor could favor a larger award to the sicker or older spouse.
Who is likely to get the house?
A. That depends on the facts of each case. If the parties have children and can afford to keep
the house, even though they will be living separately, the law usually favors giving the house to
the spouse who will have custody of the children most of the time. If the parties cannot afford to
keep the house, it may be sold and the proceeds divided (or perhaps given to one party).
In some cases, there is a middle-ground approach: The spouse who has primary custody
of the children will have a right to live in the house for a certain number of years. At the end of
that time, that spouse will buy out the other spouse's interest or sell the house and divide the
proceeds.
What if the parties have a negative net worth--owing more money than they have?
A. In that uncomfortable but common situation, the court (or the parties by agreement) will
divide whatever property they have and then allocate the responsibility of each party to pay off
particular debts.
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