Property and Debt Division
The divorce process can be financially complicated and emotionally difficult. When a couple decides to divorce, the process of separating their lives often includes dividing whatever they own together. Shared assets can consist of “real” property (land) and personal property. “Personal property” is everything other than land: furniture, belongings, vehicles, financial holdings (cash, bank accounts, stocks, investments, etc.), and unvested assets (like pensions).
The court requires divorcing spouses to disclose all their assets and debts. These are classified as “marital property” or “separate property.” Marital property will be divided during the divorce proceedings by agreement of the parties or by the court. Separate property will remain with one spouse exclusively.
- Marital property includes most real and personal property and debt that either partner earns or otherwise acquires during the marriage, up until the separation or divorce proceedings begin.
- Separate property includes real or personal property and debt that one spouse acquired before the marriage or after the marital litigation was filed. A gift, bequest, or inheritance from someone other than the spouse may also be considered separate property.
For example, one spouse’s student loan debt, obtained before the marriage, would likely be separate property. However, the mortgage on a jointly purchased family home would likely be a shared obligation (marital property), even if it is held in only one spouse’s name.
Spouses can enter into a written agreement to hold specific property apart as “separate” that would otherwise be considered marital property.
For example, a valid prenuptial agreement might provide that one spouse’s pension rights, which accrue during the marriage, would be the earner’s separate property in case of divorce.
Statutory Guidelines for Dividing Marital Property
Most property (and debt) that spouses acquire during marriage is considered shared “marital property.” This property must be divided fairly between them during a divorce. If the parties cannot agree on an “equitable distribution” of their property, the court will hear testimony, consider evidence, and make findings of fact and dispositional rulings.
South Carolina law provides some guidance about factors a court should consider when determining an equitable division of marital property, including:
- The duration of the marriage and the parties’ ages when they were married and when the marital litigation begins.
- The misconduct or fault of the parties (subject to certain limitations).
- The value of the marital property and contribution of each spouse, including the value of a spouse as a homemaker if applicable.
- Each spouse’s income and earning potential, both present and future.
- Each spouse’s physical and emotional health.
- The need of one or both spouses for additional training or education to achieve their income potential.
- Each spouse’s nonmarital property, if any.
- Any vested retirement benefits or the lack thereof.
- Whether one spouse has been ordered to pay separate maintenance or alimony.
- The desirability of awarding the family home as part of equitable distribution or the right to live there for reasonable periods to the spouse who has custody of any children.
- The tax consequences for each spouse from the distribution.
- Either spouse’s pre-existing support obligations like child support or alimony.
- Liens, encumbrances, and debts of the spouses on the marital property and any separate property.
- Child custody and child support obligations related to the divorce.
- Other relevant factors (that the court must expressly set forth in its final order).
The importance of these factors and how they apply will vary from case to case, depending on the facts and circumstances. The value consideration of a spouse’s retirement benefits, for example, will be very different for a young couple with no children divorcing after a few years of marriage than it will be for older spouses with children after decades of partnership. An experienced, capable divorce attorney can present a clear, accurate picture to the court of your marital contributions and financial needs and help you obtain the resolution you deserve.
Marital Settlement Agreements
A court’s determination of “fair” may not be what either spouse believes is best for themselves or their family. Fortunately, the parties have the option to negotiate an agreement that settles the division of marital assets, including the allocation of real and personal property, rather than leaving the determination to the court. Often, spouses have an emotional or sentimental attachment to personal property that does not correlate with its actual value. Spouses can agree on a division of property that may not seem objectively equitable to a court, so long as they do so voluntarily and without coercion or duress.
For example, one spouse may agree to forgo their interest in the other’s pension and retirement benefits in exchange for full ownership of the couple’s vacation property (which a court may otherwise direct to be sold and the profits divided).
Negotiating a mutually beneficial and agreeable marital settlement agreement that divides marital assets can be challenging. Each spouse should engage professional legal representation. Your attorney may suggest alternative dispute resolution resources, like mediation, to help you and your spouse reach an agreement rather than engaging in an emotionally difficult and costly legal battle. An experienced divorce attorney can help negotiate creative solutions that respect your values and preserve your financial future, and will fight for your rights in court if negotiations fail. Contact Indigo Family Law today to discuss your unique situation and learn how we can help you.
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