A divorce requires couples to divide their assets, including their financial assets. While you are dealing with huge life changes, you are also dealing with a huge financial transaction – often the largest one in your life.
In law, we call this process equitable distribution. The goal of the Court in equitable distribution is to provide a fair (“equitable”), though not necessarily equal division of assets at the end of a marriage.
Below, our Virginia divorce attorneys at Slovensky Law explain the steps we take, along with the court, to divide your assets. We believe that if you understand the three-step process, you will have a better case outcome.
Step One: Identify & Classify
The first step is to identify both parties’ assets and debts.
Our team, along with the adverse party, will gather evidence of all of your and your spouse’s assets and debts. It is important not to overlook the debts because they can be divided in equitable distribution. Even if you didn’t know your spouse had credit cards, those debts may be considered in equitable distribution, and you may be responsible for helping pay them back.
The next step is to sort the assets into three categories:
- Marital, and
Separate property is property that belongs just to one spouse; this includes money that the spouse had before the marriage and inheritances (as long as the property didn’t get mixed with marital property).
Marital property includes all assets obtained during the course of the marriage.
Some property can be both separate and marital, in other words, hybrid property. This could be a home or retirement account that belonged to one spouse before marriage but gained value throughout the marriage.
If the financial patterns are complex, we may have to do “tracing” which may or may get a forensic accountant involved to see whether the money came from a marital or separate source. There can be some very complex rules as to whether funds were marital or separate if the finances got mixed together.
The earlier in the process you help your Virginia divorce attorney accurately identify all the debts and assets, the more quickly you can resolve your case.
Step Two: Value
Some property is easy to value: credit cards, bank accounts, etc.
Other property is more difficult – houses, businesses, and pensions, for example.
Hybrid property is unique because we have to identify both the marital and the non-marital amount of the property. Through different methods of valuation, we can determine which portions of the hybrid property are separate and which are marital.
Step Three: Division
Next, the court will divide the assets. Many times, the court simply decides to divide the marital property in half between the parties.
However, the court does not have to make an equal division. In fact, the court uses many factors to make its decision, including:
- The ways in which each spouse contributed to the family and assets
- The length of the marriage
- The fault of either party for the end of the marriage
- Tax consequences
- The uses of the property, and
Importantly, the court can also divide marital debts. So, for example, you may come away with a large portion of the retirement savings but also get saddled with the bulk of the mortgage. Usually, debts are just divided in half, but, again, the court has the discretion to decide otherwise. If the debt is attached to an asset, they usually go together to the same person- so if you get the car, you take the attached debt as well.
The value of assets are determined as of the date of the divorce trial. If your case goes to trial, we may need an initial valuation and then another valuation at the time of trial.
If your case requires the division of retirement accounts following the divorce, we will use a particular process to divide them. This process can take quite a while and requires us to work with the retirement plan administrators.
This is a lot of information. But we want you to have an idea of how the law handles your finances in divorce and to be prepared for what will happen throughout the divorce process. Our job is to do our very best to convince the court to give you the best financial outcome possible.