Even when a divorce is amicable, deciding how to divide the household’s property is difficult. When a divorce is contentious, the problem is much much worse. In longer marriages in particular, there can be many types of property involved, and valuation of these assets can be very fluid. In other words, it is going to be hard for people who do not trust each other to agree on the value of many of the assets.
The issue of property division frequently involves the family home, retirement and pension plans, stock options, restricted stock, deferred compensation, brokerage accounts, rental property, closely-held businesses, professional practices and many other holdings.
The complicated part is that it is not enough to simply list out the assets at their current value and divide them up. Different assets will be helpful in the short or long term. You need to know the asset’s liquidity, its cost basis and what the tax consequences will be in the sale of that asset.
One important distinction is the one between marital property and separate property. Generally, separate property includes:
- Property owned by either spouse prior to the marriage
- An inheritance received by the husband or wife (either before or after the marriage);
- A gift received by the husband or wife from a third party
- Damages received for pain and suffering as a result of a personal injury lawsuit
Commingling separate property with marital property can convert the separate property to marital, so if you are contemplating divorce, it would be wise to keep property separate.
Property that is acquired during the marriage, aside from those listed above, is usually considered marital property, even if the asset is titled in only one spouse’s name.
Pittsburgh property division attorneys point out that Pennsylvania is an equitable distribution state. This means that the division of property between spouses does not have to be exactly 50-50, but it should be fair and equitable. Generally, the courts look at:
- The length of the marriage
- The standard of living established during the marriage
- The income or property brought into the marriage by each spouse
- The income and earning potential of each spouse
- The age and physical/emotional health of each spouse
- The financial situation of each spouse when the divorce is finalized
- The contribution of a spouse to the education, training or earning power of the other
- The needs of the custodial parent to maintain the lifestyle for the children
Source: Forbes “Understanding How Assets Get Divided In Divorce” 4/12/2011