Equitable Distribution of Property
The goal of Virginia's system of property division, known as "equitable distribution," is to divide divorcing couples’ marital assets equitably (fairly), giving due consideration to both their monetary and nonmonetary contributions to the acquisition of property and the marriage.
Spouses can enter into their own agreements about how to divide their property. Their agreements can be memorialized in a written document called a “separation agreement,” which is usually drafted by lawyers.
Although you can try drafting this agreement on your own, it’s not usually recommended, especially if your case involves complex financial issues. An experienced family law attorney will know how to draft these agreements, what specific provisions (language) should be included, and can help make sure your rights are fully protected.
If spouses can’t resolve these issues on their own, they will have to go to court, where a judge will decide for them.
How do Courts Divide Marital Property in Virginia?
Courts must determine the ownership of all “real and personal property." This term includes a wide variety of assets, including jewelry, the marital residence, other real estate, bank or credit union accounts, furniture, paintings or other art work, automobiles, business interests, and other types of property managed by both or either spouse during the marriage. Most future income and future assets, except for pensions, are not included in equitable distribution of property.
In Virginia, courts must follow specific procedural requirements for this division, including the following:
Determine the character of property: marital or separate
The court classifies all property as marital (meaning acquired during the marriage using marital funds) or separate (meaning acquired before marriage, after marriage, or by inheritance or gift from a third party).
Marital property may be distributed between the spouses through equitable distribution. Typically, spouses get to keep their separate property after a divorce. (See the section below on marital versus separate property for more information.)
Value the property
The court must set values for property and usually does so using current “fair market value” (FMV); this is what you could get if you sold the asset today, not what you originally paid.
Used items generally sell for much less than their purchase price. For example, if you paid $1200 for a new T.V. five years ago, you are not likely to fetch $1200 for that same T.V. now. So, the court will assign the T.V. whatever value it believes it could be sold for today.
FMV can be found by looking at comparable sales online. For cars, you can use the Kelly Blue Book at www.kbb.com: a trusted source for used car values. For houses, you can check recent sales of similar homes in your area, or look for your home’s estimated value on a site like www.zillow.com.
But, some specialty items, such as rare collectibles or certain types of real property with special improvements are difficult to value. For these assets, couples may need to hire professional appraisers.
If spouses can’t agree on a value, a judge will have to decide. Both spouses must submit reliable evidence in support of their estimated value (e.g., an appraiser’s official report). This evidence is then presented to a judge during an equitable distribution hearing.
Divide the property
Finally, the court will decide who gets what, taking into account each spouse’s rights and interests. Where the division of a particular asset is not practical, the court may order either spouse to pay a monetary award to the other, in lieu of the property. Any monetary award is based on the value of the property in question.
Courts will also consider any waste of marital assets. So, for example, spouses who hide, transfer, or destroy marital property can be punished for this "dissipation" or waste of assets. In such a case, a court may award the “innocent” spouse a greater amount of the marital property to compensate for the loss of assets.
Classifying Property: Marital Versus Separate
As stated above, courts must determine whether property is marital or separate. Because separate property is excluded from the division of property between spouses, characterization is often a hotly-contested issue, so it deserves a section all to itself.
Virginia considers marital property to be of three basic forms:
- property acquired by either spouse during the marriage that is not separate property
- property that is part marital and part separate, and
- property whose title is held by both spouses (however, this still may be proven to be separate or partly separate if it can be traced to separate property).
Separate property includes:
- all real and personal property acquired by either spouse before the marriage
- all property acquired during the marriage by inheritance or gift from a third party (not one of the spouses), and
- all property acquired during the marriage in exchange for or from the proceeds of the sale of separate property, provided it is maintained separately (but any income generated from separate property by the active efforts of either spouse is classified as marital).
Separate property can also become marital property in several ways, including the failure to maintain the property as separate or by co-mingling it with marital property in a way that is too complex or undocumented to trace back to its source.
Marital property, however, cannot become the separate property of either spouse without a valid agreement between the couple.
Pensions are marital property to the extent that they were earned during the marriage and before separation. The marital share is a percentage, based on a ratio of months of marriage in which they were earned, compared to all months of unmarried or separate pension-earning.
Pensions can be very difficult to value in the context of a divorce, so many divorcing spouses will need to talk to a family law attorney and/or pension evaluator for help.
Debts are also divided in divorce. Courts will assign debts based on several factors, including:
- the debts and liabilities of each spouse
- the basis for the debts and liabilities of each spouse, and
- the property used as security for the debts and liabilities of each spouse.
The court can apportion and order payment of debts that were incurred before separation using the above factors, but this will not necessarily protect either spouse from creditors. Both spouses remain vulnerable to third-party creditors for all debts incurred during the marriage. Thus, whenever possible, it’s usually best to address and/or pay off all marital debts during the divorce.