Ch 11 property division 2ed

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Class NameInstructor NameDate, Semester

Family Law for the Paralegal2nd Edition

Wilson

Chapter 11:Property Division

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LEARNING OBJECTIVESAfter this lecture, you should be able to:

Cont.

Identify the five phases of the property division process.

Distinguish between separate and marital property.

Identify kinds of property subject to division when a marriage dissolves.

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LEARNING OBJECTIVESAfter this lecture, you should be able to:

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Distinguish between the community property and equitable distribution approaches to property division.

List factors courts consider when dividing property and liabilities upon divorce.

Describe the paralegal’s role in the property division process.

Learning ObjectiveAfter this lecture, you should be able to:

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• Definition of property: What is “property” and what property do the parties have?

• Classification of property: Is the property “separate” or “marital” property?

• Identification of property subject to division upon divorce: Which property can the courts reach to effectuate a division of property?

• Valuation of property: What is the property worth – how and when is it valued?

• Division of property: How is property divided – what approaches do the courts apply?

What are the five phases of the property division process?11.1

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• The threshold question in a property division case is “Does a particular asset fall within a definition of “property”?

• Some assets are clearly property such as houses, boats, cars, jewelry, antiques and art work. But some assets such as the goodwill of a business, a pet, or a professional degree may or may not be considered “property” depending on the jurisdiction.

• In the first stage of the property division process, the parties identify all of their potential assets and liabilities including both tangible property (property that has a physical form such as a car or cash) and intangible (property that has no physical presence such as a patent or a pending legal claim).

• See Cases 11.1 Traczyk v. Traczyk (1995), 11.2 Bennett v. Bennett (1995), and 11.3 Woodworth v. Woodworth (1983) on pages 372-375 of the text.

What constitutes property?11.1

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• Separate property refers to property that a spouse owned before marriage or acquired during the marriage by inheritance or gift from a third party and it may also include property acquired during the marriage in exchange for separate property.

• Marital property refers to property that is acquired by either or both parties during the marriage, other than by gift or inheritance, that is subject to division at the time of dissolution of the marriage.

What is the difference between separate and marital property?11.2

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• Disability awards: The majority of courts focus on the underlying purpose of the award – a disability component will be viewed as separate property and a retirement component as marital property.

• Personal injury awards: The majority position is that the portion designed to compensate the recipient for pain, suffering, or disability is categorized as separate property and the component designed to make up for economic losses is considered marital.

• Appreciation in the value of separate property may be classified as separate or marital often based on whether the appreciation was passive (it resulted from market forces or the passage of time) or active (it resulted from effort).

• Accrued sick or vacation leave: The courts vary but will usually focus on the extent to which the benefit can actually be paid or can only be applied to postretirement health insurance benefits, etc.

What kinds of assets are difficult to classify as separate or marital?11.2

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• A transmutation or change can take place in the character of property during a marriage in a number of circumstances. For example:

• The parties may execute a postmarital agreement and designate certain separate property as marital.

• They may decide to jointly title the marital home or other property for estate planning or other purposes.

• They may treat a separate asset as a marital asset by spending both time and funds on it such that a court may find it has changed into a marital asset.

• They may have commingled funds for example by placing the proceeds from the sale of separate property into a joint bank account.

Can property change from separate to marital or from marital to separate?11.2

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• There are two approaches taken by the courts:

– Dual property states: The majority of states follow the general rule that only the property acquired during the marriage is subject to division by the court. Property belonging to a spouse prior to the marriage that has not changed in character remains the property of that spouse.

– All property states: The minority position is that the court may assign any of a spouse’s property (including separate property) at the time of divorce if necessary to effectuate an equitable division of property.

What property can a court reach when dividing the parties’ property upon divorce?11.3

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• There are three basic issues in valuation cases:– Which property of the parties should be valued?• If the parties have few if any assets or they can agree on a

reasonable allocation of property, valuation may not be an issue. The assets most commonly valued are pensions, real estate, and business interests.

– What is the appropriate date for valuation?• Some states establish the date by statute or case law, Most prefer a

flexible approach so the date might be the date when the parties separated, the date the Complaint for Divorce is filed, the date discovery is completed, the date of the divorce, or some other agreed upon date.

– Who will conduct the valuation and how?• Valuation of some assets such as bank accounts and vehicles is

relatively straightforward. However, in some cases it may be necessary to have professional assistance such as an actuary to calculate insurance and pension values, appraisers to estimate the value of real estate, or an expert of some kind to value a professional practice or business, a copyright, or a spouse’s contribution as a homemaker.

When and how is marital property valued for purposes of division?11.3

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• The parties may have executed a valid premarital agreement in which they mutually agreed on how their property would be divided in the event their marriage terminated in a divorce or legal separation.

• The parties may negotiate a mutually agreeable division of their property and include it in their separation/marital agreement for approval by the court.

• If the parties are unable to reach an agreement, the matter will be tried before the court and a judge will determine an appropriate distribution applying equitable distribution or community property principles.

What are the three primary ways in which the property of parties to a divorce may be

divided?11.4

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• In the community property approach, a husband and wife hold property acquired during the marriage in common and each spouse is generally deemed entitled to a one-half interest in the property no matter in whose name it is held. It is based on a view of marriage as a partnership in which both parties act for the benefit of the marital unit.

• When the community property approach is applied, the marital property is usually divided equally upon divorce absent an agreement to the contrary. Separate property remains separate property and generally includes assets brought into the marriage, property acquired in exchange for separate property, and gifts and inheritances received by a spouse during the marriage.

• A minority of the states are community property states. See Exhibit 11.5 Community Property – Ten Commonly Asked Questions on pages 389-391.

What is the community property approach to property division?11.4

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• The equitable distribution approach is based on the legal concept that upon divorce property accumulated during a marriage should be divided between the parties equitably, but not necessarily equally, based upon principles of fairness.

• Each state adopts by statute and/or case law a series of factors to be considered by the courts when making a property distribution. Judges consider the factors in light of the facts of each case, recognizing that both parties have contributed to the marriage in a variety of ways (financially, maintaining the home, raising the children, etc.). A trial court’s decision generally will not be reversed on appeal absent an error in applying the law or an abuse of discretion.

• A majority of states apply this approach.

What is the equitable distribution approach to property division?11.4

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• In an equitable distribution jurisdiction, the following factors are commonly considered among others:

• The contribution of each party to the acquisition, preservation, or increase or decrease in value of the marital property

• The duration of the marriage

• The relevant economic circumstances of each spouse

• The age, health, station, occupation, amounts and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties

• The custodial provisions for any children

What are some of the factors the courts consider when dividing the parties’ property

upon divorce?11.5

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• The reasonable opportunity of each spouse for future acquisition of capital assets and income

• The tax consequences of the property division• A minority of states will consider marital

misconduct.• See Case 11.4 Wade v. Wade (2005) on pages

386-388 of the text for an application of this approach by a Vermont court.

• In a community property jurisdiction, the marital assets are essentially divided equally. The general rule in most community property states is that the courts may consider conduct when dividing the marital estate particularly economic misconduct such as dissipation of marital assets, concealing assets or disposing of them in a fraudulent matter.

What are some of the factors the courts consider when dividing the parties’ property

upon divorce? (continued)11.5

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• Tasks commonly performed by paralegals in property division cases include the following:

– Helping to compile an inventory of the parties’ assets and liabilities

– Drafting discovery requests (such as requests for production of documents from employers, and deposition questions and interrogatories relating to factors considered by the court such as dissipation of marital assets)

– Drafting motions, supporting affidavits, and proposed orders, if required (such as a motion for appointment of an appraiser)

– Researching governing law (statutes, case law, and secondary sources) relevant to disputed issues (such as the treatment of professional goodwill of a business or the proceeds of personal injury awards)

– Drafting property provisions for inclusion in separation agreements (addressing assets and liabilities)

– Helping to prepare exhibits for use in negotiations, hearings, and at trial

What is the role of a paralegal in a property division case?11.6

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Cont.

Chapter Summary

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Chapter Summary

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Ch 11 property division 2ed

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