10. Post Tax Outcome
12. Closing Thoughts
13. About the Author
Property in General
In this section I want to discuss the general concepts governing all your and your wife’s property – whether real estate, cars, pension plans, household furnishings, or other assets. This discussion will give you a sense of what will be important to the court in reaching a decision in your case, (and perhaps more significantly, what is not important).
Because the law on this topic differs between “source of funds” states on the one hand (which includes all states except community property states) and “community property” states on the other (there are nine: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin ) I must deal with the two types separately. Since statistically more readers will be in “source of fund” states, my explanations will refer to those states except where expressly stated otherwise.
First, it is necessary to discuss the category of assets which a divorce court does not even have the jurisdiction, (i.e. the authority) to transfer or divide between the parties. That asset category is termed “separate” property. The remaining assets owned by either of both parties are termed “marital”. This separate vs. marital distinction is a very complicated one which has spawned countless dry volumes of legal exegesis. Let me start with the UMDA definition (as used in Missouri, for example):
2. For purposes of sections 452.300 to 452.415 only, “marital property” means all property
acquired by either spouse subsequent to the marriage except:
Property acquired by gift, bequest, devise, or descent;
Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;
Property acquired by a spouse after a decree of legal separation;
Property excluded by valid written agreement of the parties; and
The increase in value of property acquired prior to the marriage or pursuant to subdivisions
(1) to (4) of this subsection, unless marital assets including labor, have contributed to such increases and then only to the extent of such contributions. As you can see, marital property is defined in the negative. It is all property owned by both or either party at the time of the divorce except for property received by one party prior to the date of marriage, or received by one party during the marriage by gift or inheritance.
It may be helpful for you to think of all property held by either or both of you as falling within one of three circles which some scholars terms “estates.” This simple schematic may help you better visualize these concepts. Technically a fourth circle should be drawn and denoted as “others” to reflect the not uncommon scenario wherein one or both spouses own an asset jointly with a third party.
Obviously the divorce court cannot justly or appropriately apportion a person’s assets who is not a party to the case. For example, a husband might own a family business jointly with his brothers and the wife may contend that the husband’s interest is marital. Depending upon what is in dispute, as well as what remedy the court is considering, it may be necessary constitutionally for the court to join the other owners as parties to the action. Certainly if a dispute exists as to what portion of the business husband owns, common sense and fair play (what the Constitution terms “due process”) requires the “joinder” of the other claimants.
These estates may engage in transactions with one another or assets may simply be moved from one estate to the other. These movements often occur without either party’s conscious intent. Before I discuss separate property, the point should not be lost that in most marriages of 10 years or more there are no significant separate assets.
Because the statute is worded as it is, all property of the parties will be presumed to be marital unless the spouse claiming something is separate provides evidence for that claim. This task is often quite simple – as to many financial assets, if they were acquired by one of the specified means or prior to the marriage, there is a document trail which the asserting party can present to the court as evidence.
Conversely, as to some assets, notoriously personal property such as furniture, there may be no helpful documents. The evidence may consist simply of the party’s testimony or that of others, in which case the judge decides based on his opinion as to credibility. Further, documents may have been lost or destroyed.
Also, where there are documents there may be a dispute as to what they mean. This disagreement often arises as to gifts – the parties can frequently establish when a gift, such as money or securities, was received but dispute whether it was intended as a gift. One party may contend that the transfer was repayment of a loan or payment for products or services, or was intended to be a loan, since forgiven.