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A Few Questions to Consider in Divorce Property Division Situations

06/29/2015 12:31 pm ET | Updated Jun 29, 2015
  • Brad Reid Senior Scholar, Dean Institute for Corporate Governance and Integrity, Lipscomb University

This comment provides a very brief and incomplete educational overview limited to the complex law surrounding divorce property division. Always consult an experienced attorney and financial and tax professionals in all family law property matters.

Divorce property division involves numerous financial and legal issues. The following is a brief list of 20 questions, among many, that must be resolved.

1. Is there a valid marriage? Sometimes, among many possible situations, there may be a preexisting marriage, such as a common law marriage, without an intervening divorce. Creating a relationship history may be appropriate. Is an annulment or legal separation preferable to a divorce, given the unique circumstances and financial needs of the parties?

2. Do the parties understand, up-front, the likely expenses associated with the divorce, such as attorney's fees, court costs and other professional fees? To what extent may the divorce court under applicable state law require one party to pay some or all of these expenses? Will proving the history and ownership of assets become relevant in a property division or result in a jury trial?

3. Do the parties understand the likely time-line and sequence of events in the divorce proceeding? Depending upon a variety of factors and the number of pending cases on the divorce court's docket, time frames may vary. Are there adequate provisions for intervening expenses? Does one spouse have control of financial records, bank accounts, vehicle titles and other assets? Should the court be petitioned to require the sharing of assets and information?

4. Do the parties understand expected courtroom decorum and attire? Has a party been adequately prepared by her or his attorney concerning what is likely to occur in court and the potential questions if testifying? One cannot be over prepared when going before a judge or jury.

5. Precisely what is the date of separation? This may become important in determining the status of property and debts acquired after this date.

6. Do the divorcing spouses have an enforceable prenuptial or other property agreement or multiple agreements? If so, this may simplify the property division process; however, an agreement may be invalid if improperly created. Also, it may omit assets or be judicially determined to be unfair to a spouse.

7. Is the divorce being undertaken subject to "community property law" or "equitable division or distribution law?" Community property law originated with Mexico and Spain and is most common in southwestern states. In an incomplete and simplified generalization, community property law treats marriage much like a partnership with a presumption of joint ownership of property. Equitable distribution allows greater flexibility for a judge to consider factors such as the duration of the marriage and contributions of the spouses in achieving a "fair" division of assets.

8. Has all of the property been identified? Will the divorce court have meaningful and enforceable jurisdiction over assets located in other states or foreign nations? A spouse may attempt to conceal or skim assets, the many techniques of which are beyond the scope of this brief comment. Intangible assets and items such as future pension benefits may be easily overlooked. Accrued tax benefits, the value of professional practices, business goodwill, life insurance, unused reward benefits, club memberships, intellectual property and items in storage are just a few of many items to consider.

Did one spouse provide funds for the other's advanced education and potentially have a right to reimbursement or a share of future earnings? Separate property that moved through a joint bank account, for example, may be subject to division. The ownership of pets and keepsakes are frequently hotly contested. New forms of reproductive technologies may create ownership issues regarding frozen eggs and embryos, for example.

Consult the Social Security Administration concerning possible benefits based upon your ex-spouse's payment record if you are age 62 or older, were married at least 10 years and are currently unmarried.

One must think carefully and consult experienced professionals to be certain property has not been overlooked or undervalued. An experienced financial private investigator or forensic accountant may be necessary if one suspects that assets are being hidden.

9. Does a spouse have a valid claim that certain assets are her or his separate property? The issue of separate property is complex with the name on a deed or title or related documents not being conclusive evidence of exclusive ownership. It is frequently necessary to trace the history and transformations of assets (for example, from an item to cash that was used to purchase another item, etc.) in order to resolve ownership. Additionally, depending on state law, a court may have broad authority over all assets.

10. Have all marital and business related debts been identified? A spouse may discover that she or he has personal liability for a debt created by the other spouse. While a court may attempt to assign responsibility for a debt to one individual, creditors frequently still have enforceable legal rights again both parties. An "innocent spouse" may be able to obtain relief from unpaid taxes. Consult a tax professional. Understand the impact of the divorce on your credit rating and obtain a copy of your credit report to identify listed outstanding creditors and your current standing.

11. Has there been waste or dissipation of assets by a spouse? It may be possible to have the court require reimbursement of the expenses of an extramarital affair, for example. However, with the advent of no-fault divorce in the 1970s, fault as a factor in property division is frequently not considered. Nevertheless, depending on the state, domestic violence (truthful or false allegations) and social media communications may become important equitable (fairness) considerations. The facts surrounding business losses may become significant. A spouse's knowledge and participation in business ventures may be equally important.

12. Is the value of all assets known? Inherited furniture or art, for example, may be valuable antiques. When in doubt have a professional appraisal made.

13. Are there marital assets that have either significantly appreciated or depreciated in value during the marriage or are likely to do so in the future? Has a financial professional reviewed possible future events in relation to these assets? For example, a business might be on the verge of a major expansion due to the efforts of a spouse. A thoughtful consideration of both events that have occurred during the marriage and may occur in the future are important.

14. Is a bankruptcy likely to occur in connection with the divorce or shortly thereafter? If so, the manner in which the property division is structured may become an important issue. For example, bankruptcy courts have broad authority over property and debts but not child support and spousal support. Also, an ex-spouse might be released from a debt in a manner that places the entire responsibility for repayment on the other ex-spouse. The precise language to be used in divorce court orders and decrees must be carefully reviewed.

15. Are minor children, disabled children or disabled spouses parties in the divorce? If so, a property division should take into account their present and future needs. Housing and transportation needs may override the desire of a healthy spouse to own a house or vehicle. Consider the present creation by court order of trust funds administered by a reputable financial institution to contain funds for college education expenses or other foreseeable future needs. Carefully restrict access to these funds.

16. Will the property division require continuing or future actions by a former spouse? Future actions may be difficult to enforce due to changes in circumstances or indifference or obstinacy by an ex. Be very cautious when creating such requirements. Be equally cautious when providing a spouse with funds to be spent in a particular way in the future, such as for college education expenses. It is easy for one to rationalize the misspending of money. A carefully crafted trust fund, as mentioned above, is a preferable option.

17. Are the spouses able to amicably negotiate or mediate? If so, significant expense and emotional stress may be avoided. However, be prepared to encounter typical negotiation tactics and blustering. Will you have consultants available to assist you?

18. Has a negotiated property settlement agreement been prepared by an experienced attorney and reviewed by a financial and tax professional? How will the agreement be enforced and are any potential enforcement mechanisms realistic? Understand that assets may disappear and ex-spouses vanish.

19. Has the divorce court incorporated the property settlement agreement into a judicial degree so that it has become final and irrevocable? Does it contain binding duties that may be enforced by a court? Are provisions as self-executing as possible or are they dependent upon future actions? An experienced attorney should appropriately accomplish this.

20. In the event that a party is dissatisfied with the decisions of the divorce judge, is there an appropriate procedural foundation for an appeal to a higher court? An experienced attorney will carefully "preserve error" and "protect the record" so that an appeal is possible.

This comment provides a very brief and incomplete educational overview of a complex topic and is not intended to provide legal advice. Always consult an experienced attorney, financial professional and tax professional in specific marital property situations.

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