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.
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When you need legal help with your divorce, please call Ascent Law at (801) 676-5506 for your Free Consultation. We want to help you.
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