John Vitela: How Is Property Divided In A Divorce?

Divorce
in Utah is a complex matter and property division is often one of the more
contentious issues that can arise. Having a basic understanding of the process
can help. Divorce is a complicated and intimidating process. Those who are
considering a divorce may have done a brief online search in an attempt to get
an idea about how the process works. Although beneficial to gather information
about the process, it is important to make sure the information you are
reviewing is not only accurate but also applies to your situation. Utah uses
equitable distribution when dividing property during divorce. An equitable
distribution is one that is deemed fair by the courts. This type of
distribution does not always result in an equal split. The court will decide on
a split based on a number of considerations. This can include the length of the
marriage, the occupations of the parties and the health of all involved. If the
marriage is relatively short, the courts are more likely to focus on the
economic position each individual was in prior to the marriage and attempt to
develop a split that would preserve this station in life.

Retirement
assets are generally considered marital property and are subject to
distribution during divorce. In many cases, courts will choose to provide the
spouse that contributes to the account with the asset. In exchange, the other
spouse is given something of equivalent value. This could be the family home or
a combination of other assets. If the retirement asset is split, special
paperwork is required to ensure payment. A divorce decree alone is not enough
to ensure that someone other than the listed owner of the retirement asset
receives payments from the account. A court order referred to as a Qualified
Domestic Relations Order (QDRO) is generally required. If a couple has a
prenuptial agreement, it will likely be used to guide the divorce. As long as
the prenuptial is valid, it can determine how assets are distributed. It
cannot, however, determine how child support payments or other expenses related
to children are determined. Property division is an extremely important part of
any divorce. It doesn’t matter how much
or how little property you and your spouse own, or what sort of assets you may
or may not possess – one way or another, your resources eventually need to be
divided.

Equitable
distribution is a misleading term which seems to imply a perfectly even, 50-50
division right down the middle. However, that’s not what equitable actually
means. The point of equitable distribution is that each spouse receives a fair
and reasonable portion of property. For
example, if one spouse has considerably greater income than the other, a
half-and-half property split would technically be equal, but it still wouldn’t
be fair. Put simply, equitable
distribution tries to put each party on a level playing field. Of course, that
doesn’t mean a 50-50 split is impossible just that it isn’t guaranteed. Long-term marriages, for example, can result
in an even 50-50 property division. In
cases involving short-term marriages, the court will attempt to put the people
back into the economic position they had before the marriage, meaning that each
party gets to keep whatever he or she owned when the marriage first started. Judges
consider a variety of factors when deciding what sort of property division
would be fair and equitable. For
example, the judge will weigh:

The age and health of each spouse, which impacts
earning ability and medical expenses.
The duration of the marriage.
What sort of job, if any, each spouse has.
What sort of income, if any, each spouse earns.

Most states are
equitable distribution states. In
community property states, all property and assets are divided evenly down the
middle with a 50-50 split regardless of outside factors like age, health, or
income. It’s important to emphasize that equitable distribution affects only
marital property, which doesn’t necessarily include all the property you and
your spouse may own. However, as a general rule, the court will typically
determine that property owned by the spouses before the marriage or received by
gift or inheritance during the marriage is usually not considered to be marital
property. For example, if you alone inherit money from your relatives, and your
wife or husband is not included in the inheritance, the inheritance is
considered to be your own, separate property. The court cannot award an item of
your separate property to your spouse, or vice versa. Spouses are usually
allowed to keep items which aren’t deemed marital property, though there are a
few exceptions. For example, separate
property can later become marital property depending on how it is used. While
somewhat controversial, prenuptial agreements have proven invaluable to
countless divorcing couples. Prenuptial
agreements, also called prenups or premarital agreements, outline how the
division of property is to be handled in the event of a future divorce. This includes real property (like land and
houses), personal property (like furniture and jewelry), and pension plans and
retirement benefits (like 401(k) s and defined contribution plans). In short,
prenups act like blueprints. In cases
where no premarital agreement exists to guide the division of assets, the court
will determine how the assets and possessions should be divided, just as it
would for marital property. In fact,
even if you do have a prenup, there are certain areas where the court must nonetheless
intervene. For example, prenuptial
agreements are not allowed to include any stipulations regarding child support,
healthcare coverage for children, or the costs of childcare (like daycare,
food, and clothing).

Splitting Specific Assets

The Home: If divorcing individuals cannot agree on who
should receive the home, the court may do one of several things:

order that the home remain in the possession of
the parent who will have custody of the children until the children move out of
the home
order that the home be given to one party and
award the other party other marital assets equal to the value of his/her share
of the home
allow one
individual to buy out the other individual’s interest in the home; or
order
that the home be sold and the equity split between the two individuals.

Other Real Property: Real property
refers to land, homes, condominiums, and other structures attached to
land. If the divorcing individuals
cannot agree on who should receive the real property, a court may:

order the property be sold and the equity
divided between the two individuals
allow one
individual to buy out the other individual’s interest in the real property;
order
that the real property be given to one party and award the other party other
marital assets equal to the value of the real property.

Retirement & Pension Plans: If only one of the divorcing individuals has
a retirement or pension plan, the other individual is typically entitled to
half of the amount earned during the course of the marriage (i.e. if the
marriage lasted 10 years, the retirement accrued during that 10 year period
will be divided, but anything accrued before the marriage will not be
divided). If both individuals have
retirement or pension plans, the court could either

order that each of the parties retain the full
value of their own plans, or
order an
equitable division of all retirement accounts.
Whenever a retirement account is going to be divided, a special document
needs to be prepared called a “Qualified Domestic Relations Order.”

Personal Property: Personal property includes anything movable,
such as cars, clothes, furniture, etc.
Courts in Utah divide personal property equitable (fairly).

General Rules the Court Usually
Follows

If divorcing
couples cannot come to an agreement on how to split their marital assets, a
court will decide for them. There are
three basic rules that will help you understand how your assets will be split
in a divorce:

Utah courts will divide assets equitably
(fairly) between spouses
all marital property will be divided between the
two spouses; and
separate
property will not be divided between the two spouses.

There are three
main categories of property that will not be split and distributed between
spouses upon divorce:

Inherited
Property: Inherited property is any
property that was left for the benefit of one spouse after another person’s
death.
Gifted
Property: Gifted property is any
property that was given to one spouse.
Premarital
Property: Premarital property is any
property that one spouse accumulated prior to the marriage and then brought
into the marriage.

Division in Utah

Couples have two
types of assets and liabilities: Non-marital and marital. Non-marital assets
and liabilities are those that a spouse owned or owned prior to the marriage.
Gifted and inherited assets, even if gifted or inherited during the marriage,
are also non-marital property. These items are set aside for the owning spouse.

All other assets
and debts are marital and are subject to equitable distribution. Furthermore,
assets that were one spouse’s prior to the marriage that has been commingled
are usually considered marital assets. In many cases, simply adding a spouse’s
name to an account makes it a marital asset subject to equitable distribution. Several
factors determine what percentage of each asset is awarded to each spouse.

Factors That Affect the Division
of Assets and Debts

If you and your
spouse cannot amicably divide assets and debts, the court will do it for you.
In most cases, it is better that you come to a fair and equitable distribution
of the assets and debts. While the court will come to a fair and equitable
distribution, you may not get an asset or debt that you want. The court looks
at the following when determining how to divide assets in an equitable manner:

How long the parties were married;
The contribution by both parties to the
marriage;
The future needs of each spouse;
Alimony awards;
Child custody;
The health and age of each spouse, which
includes employability, potential retirement and business chances after the
divorce;
The occupation of each spouse, which determines
earning power;
Each spouse’s education as it pertains to
employability; and
The non-marital assets of each spouse.

Debts are
considered in much the same way, but do have some additional parameters:

Premarital agreements.
Real property may be sold, one spouse may buy
the other out or one spouse may keep the marital home in exchange for other
assets. If the real property is sold, equity is divided equitably between the
spouses. Generally, if one spouse keeps the house, that spouse is responsible
for the mortgage. If possible, the mortgage should be refinanced so as to hold
the other spouse harmless.
Vehicle payments are generally paid by the
spouse who keeps the vehicle. If the parties have two vehicles, each spouse
gets one, along with the car payment, if any.

Retirement plans
and pension benefits are handled a bit differently. In most cases, if a plan or
benefit is considered a marital asset, the person whose name is on the account
gets it. However, if the plan or benefit skews the equitable distribution, the
court will split the plan or benefit. If only one spouse’s name is on the plan
or benefit, the court enters a qualified domestic relations order, or a QDRO,
to order the holder of the account to divide it between the spouses as dictated
by the court.

List of Assets and Debts for
Divorce

Marital assets
and debts that are subject to equitable distribution may include:

Real property, including the marital home and
any other real property, such as land, investment property, and business
property. Debts that go along with property include mortgages, second
mortgages, and liens on the property.
Furniture and any payments on the furniture,
whether those payments are owed to a bank or the furniture store.
Some personal property, including jewelry and
any debts related to the personal property.

Additional
assets and debts include home equity, tools, vehicles and payments on vehicles,
recreational vehicles and payments on them, retirement accounts, investments,
life insurance policies, financial portfolios, bank accounts, lines of credit,
revolving debt such as credit cards, personal loans, debts owed to friends and family,
tax debt and past due accounts such as medical bills. Debts created outside the
marriage, such as student loans that were created by one spouse prior to the
marriage are awarded to the creator of the debt.

Call Ascent Law Today

It is generally
wise to seek legal counsel when going through a divorce. These are just a few
of the many issues that must be addressed during the property division
determination portion of the divorce and this is just one portion of the
divorce.