This is the last of three posts which explore this 3-step process for equitable distribution of assets in divorce. Step 1, the first in the series, reviewed what is marital property and what is non marital property. In Step 2, described in the previous post, parties determine the value of all assets, both marital and non marital.
Let’s return to the example of Mike and Jen (not real names) from Step 1. Jen and Mike identified what is and what is not marital property, and they determined the value of all assets. The couple’s assets include: a home in both names, a condo in Jen’s name only, Jen’s inherited piano, Jen’s 401k and Mike’s rollover IRA, a joint investment account, Jen’s cashed-in holiday and vacation pay, and Jen’s lottery winnings a few months after separation.
What happens now? Step 3—Equitable Distribution
Mike and Jen could have the court decide what to do. How would that play out? “It’s complicated.”
The court can make a monetary award, ordering one party to pay the other a sum of money, either in a lump sum or over time. In general, the court cannot transfer ownership of a specific asset owned by one or both of the parties to just one of them. However, there are some important exceptions:
The court may transfer ownership of an interest in a pension, retirement, profit sharing, or deferred compensation plan, from one party to either or both parties.
Subject to the consent of any lienholders (example: a car loan company), the court may transfer ownership of an interest in family use personal property, from one or both parties to either or both parties.
Subject to the terms of any lien (example: mortgage), the court may transfer ownership of an interest in a jointly owned home used as the principal residence of the parties when they lived together, by:
Ordering transfer of ownership to one party if the transferee obtains release of the other party from any lien against the property.
Authorizing one party to purchase the interest of the other party, in accord with terms and conditions set by the court.
Some combination of a and b above.
The court must mull over many factors in deciding whether equitable distribution calls for a monetary award, transfer of property (when allowed), neither, or both: (1) contributions, both monetary and nonmonetary, of each party to the well-being of the family; (2) value of all property interests of each party; (3) economic circumstances of each party at time of award; (4) circumstances that contributed to estrangement of parties; (5) duration of marriage; (6) age of each party; (7) physical and mental condition of each party; (8) how and when specific assets were acquired, and efforts expended by each in accumulating marital property; (9) alimony award and use and possession award; (10) non-marital contribution to real property held as tenants by the entirety; (11) any other factor deemed necessary or appropriate.
Factors listed above are not prioritized in any way. Application and weighing of factors is left to the trial judge. “Equitable distribution” is the goal—but often judges try to order approximately equal division.
Back in Step 2, we asked: Why determine the value of non marital assets, too? Because Factor (2) in the list above includes non marital property.
What about Jen’s lottery jackpot? When one party, wholly through their own efforts, without any direct or indirect contribution by the other, acquires a specific item of marital property after parties have separated and after the marital unit has, as a practical matter, ceased to exist, a monetary award having the effect of dividing that asset equally would ordinarily be inequitable.
What about Mike’s graduation gifts, swept up in the joint investment account? Factor (8), “how and when specific assets were acquired, and efforts expended by each in accumulating marital property” might apply.
What about Jen’s condo? That was acquired before marriage, but payments were made from marital funds during marriage. How much of its value will a judge determine is marital – and how much non marital?
What about other assets? As the saying goes, the devil is in the details. Mike and Jen have lots of assets that are partly marital and partly non marital. How much a trial judge assigns to each category could greatly impact a monetary award.
Feeling uncertain of the outcome in court? So are Mike and Jen.
Jen and Mike might choose to negotiate—directly, through a property division attorney, with the help of a mediator, or using some mixture of these approaches.
In Maryland, couples may make a valid and enforceable agreement dividing assets in divorce. Provisions regarding real property, retirement and survivor benefits, business interests, bank accounts and investments, debts, pets, cars, and household furnishings—as well as custody and visitation, child support, alimony, health insurance, and life insurance—may all be included in a marital settlement agreement.
A marital settlement agreement affords parties control and flexibility: Parties may consider factors which would not concern a court, and often include terms that are beyond a court’s power to order. However, once included in a marital settlement agreement, such terms can be enforced by court order.
Mike and Jen have an important decision to make: make their own deal—or let the court decide. Like marriage itself, a deal will take both to say, “I do,” but only one to say, “I don’t.” They will both need to keep in mind wisdom from the Rolling Stones: “You can’t always get what you want. But if you try sometimes, you just might find you get what you need.”
Managing the process for dividing assets in divorce through negotiation or mediation—or, when all else fails, litigating equitable distribution of assets in court—calls for skilled, experienced legal representation from a property division attorney. Call us with your questions.
