Equitable Distribution in Divorce
Equitable distribution is the legal term used to describe the process of dividing property and debt in a Virginia divorce. Equitable distribution is one of the most difficult and complex areas of law. There is literally a 3 volume set of books that focuses only on equitable distribution!
Our divorce lawyer, John Kitzmann, has handled complex equitable distribution disputes in some of the biggest cases in Virginia, involving hundreds of millions of dollars of property. Mr. Kitzmann, while a lawyer at McGuire Woods, practiced business and corporate law. Because many divorces involve businesses, Mr. Kitzmann’s business law experience gives him the experience and skill necessary to handle divorces involving businesses. Mr. Kitzmann has taught other lawyers courses and written articles on equitable distribution.
Equitable Distribution is a Three Step Process
Equitable distribution is governed by Virginia Code Section 20-107.3 and court cases that have interpreted this statute.
The first step in equitable distribution is to identify all of the property and debt that need to be divided. Discovering all of the property and debt typically involves a close examination of tax returns, financial records, credit reports, and other documents. Typically, interrogatories (written questions which a party in a divorce must answer) and request for production of documents (a list of documents that a party in a divorce must produce) are sent to the other spouse. Furthermore, subpoenas can be served on banks, CPAs, and others to obtain financial information and documents. If necessary, depositions of the parties, CPAs, or others may be necessary.
Each item of property or debt needs to be classified as a) marital, b) separate or c) hybrid. Marital property and debt can be divided between the spouses. Separate property and debt will go to only one spouse. The marital portion of hybrid property can be divided, but the separate portion of hybrid property will go to only one spouse.
Marital Property and Debt: With some exceptions, property or debt is marital if it was acquired during the marriage or is titled to both spouses.
Separate Property and Debt: Property or debt is separate if it was:
- acquired before the start of the marriage
- acquired after the date the parties separated
- acquired with inherited or gifted money
- received as a gift from someone other than the other spouse
Hybrid Property and Debt: Hybrid property or debt contains a marital portion and a separate portion. Examples:
- If a spouse owned a retirement plan before the marriage with $100,000 as of the date of marriage and then during the marriage contributed another $100,000 to the plan, the $100,000 from prior to the marriage would be marital property and the $100,000 that was contributed during the marriage would be marital property.
- One spouse owned a business before the marriage. During the marriage, the spouse continued working in the business and increased the value of the business through her efforts during the marriage. The amount the value was increased during the marriage due to the spouse’s work would be marital property. The rest of the value would be separate property.
- One spouse owned a house prior to the marriage. During the marriage, the spouse sold her house and she and her husband used the proceeds to buy a new house. Then, the spouses paid the mortgage on the new mortgage. In this case, the money from the sale of the original house would be separate property and the amount the mortgage payments reduced the mortgage would be marital property.
Credible evidence of the value of each item of property must be obtained and provided to the court. An expert appraisal must typically be obtained for the following types of property:
- Real Estate
- Personal property (things like art, jewelry, furniture, etc.)
If credible evidence is not presented to the court, the court will refuse to equitably distribute that item of property.
What Factors Does the Court Consider?
When dividing the marital property, allocating marital debt, and ordering the payment of a monetary award, the judge is required to consider the factors set forth in Virginia Code § 20-107.3. These are:
- The contributions, monetary and nonmonetary, of each party to the well-being of the family;
- The contributions, monetary and nonmonetary, of each party in the acquisition and care and maintenance of such marital property of the parties;
- The duration of the marriage;
- The ages and physical and mental condition of the parties
- The circumstances and factors which contributed to the dissolution of the marriage, including adultery, sodomy outside of the marriage, a felony conviction, cruelty, reasonable apprehension of bodily hurt, desertion or abandonment;
- How and when specific items of such marital property were acquired;
- The debts and liabilities of each spouse, the basis for such debts and liabilities, and the property which may serve as security for such debts and liabilities;
- The liquid or nonliquid character of all marital property;
- The tax consequences to each party;
- The use or expenditure of marital property by either of the parties for a nonmarital separate purpose or the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties; and
- Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.
How Will the Court Divide Property and Debt?
Separate property will go to the spouse who acquired the property.
If marital property is jointly titled, the court can a) give the property to one spouse or the other, b) divide the property, c) order the property to be sold and the proceeds divided between the spouses. A court is more likely to order an asset sold if neither party provided the court with credible evidence of the value of the item.
If marital property is titled to only one spouse, that spouse will keep the property, but he or she may have to pay the other spouse a “monetary payment” to compensate the other spouse for his/her interest.
For separate debt, the spouse who acquired the debt will be ordered to pay it. For marital debt, the court will typically order each party to pay a portion of the debt.
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We are located in Charlottesville, but our lawyers handle cases in Charlottesville, Albemarle County, Greene County, Fluvanna County, Louisa County, Nelson County, Madison County, Orange County, Roanoke, Harrisonburg, Staunton, Waynesboro, Augusta County, and across Virginia.
Davidson & Kitzmann, PLC
413 7th ST NE
Charlottesville, VA 22902
Phone: (434) 972-9600
Fax: (434) 220-0011
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