John F. McKenna, Esquire

Three steps – identification, valuation and division – help couples reach a fair and equitable division of marital property

When someone is considering divorce, a common question arises: How will the marital property be divided? It is actually a three step process. First, you must identify the marital property. Second, you must assess its value. Third, you must fairly divide it. Here is a more detailed review of the steps:

Identifying Marital Property
Marital property includes all property acquired by either husband or wife during a marriage, including the increase in value of non-marital property prior to the date of final separation. There are some very specific exceptions:

• Property acquired prior to marriage or acquired in exchange for property acquired prior to marriage;
• Property excluded by valid agreement entered into before, during, or after the marriage;
• Property acquired by gift, except between spouses, as well as personal property and real property passed on through a will or handed down through the family;
• Property acquired after final separation, except for property acquired in exchange for marital assets;
• Property sold or disposed of prior to final separation;
• Certain exempt veteran's benefits;
• Mortgaged property, but only up to the amount of the mortgage; and
• Money received from a lawsuit started prior to marriage or after final separation regardless of when payment was received.

All personal property acquired by either party during the marriage is presumed to be marital property regardless of whether the property is held jointly or by either spouse. This presumption can be overcome if either party can prove the property was acquired by one of the exceptions above.

Valuing the Property
Next, the parties must determine, and agree upon, the worth of the property. If the parties cannot agree, there are experts available who can value the property, such as a qualified real estate appraiser. If the parties cannot agree on the appraiser, the court will do so once a petition is filed. Generally, the date that valuation is determined is at the time of distribution, which means at the time of trial when we ask the courts to divide the marital property.

Business Valuation
Another common problem is valuing a business or partnership interest. If the husband or wife is a shareholder in a small corporation, a qualified accounting professional should determine the value of the business interest or stock shares.

Establishing Pension Values
Questions also arise when establishing pension values. Only the portion of the pension accrued during the marital period up until time of separation is considered marital property. Furthermore, a pension plan must be valued for its present value. Determining pension values is a complicated process best performed by a pension analyst specializing in divorce practices.

Dividing the Property
Finally, the parties must agree upon a plan to divide the assets. Agreement at this stage is critical. Three basic rules apply when it comes to dividing marital property:

• Be honest. The truth is likely to come out in the litigation process anyway.
• Agree when you can. Disagreement means hiring experts and more costly litigation.
• Be willing to compromise or exchange one item for another whenever possible.

Most negotiation occurs at this stage, and some give and take is essential. However, if the parties cannot agree, the court will, upon the request of either party, divide the property without any regard for marital misconduct and in such proportion and manner as it deems appropriate considering the following relevant factors:

• The length of the marriage;
• Prior marriages of either party;
• Age, health, station, amount and sources of income, vocational skills, employability, estate liabilities, and needs of the parties;
• Contribution by one party to the education, training, or increased earning power of the other party;
• Opportunities for future acquisitions of capital assets and income;
• Sources of income of both parties, such as medical, retirement, insurance, or other benefits;
• Contributions of purchase and maintenance of marital property, including the contribution of a party as a homemaker;
• Value of property that each party already has;
• Standard of living of the parties established during the marriage;
• Economic circumstances of each party, including taxes that will be levied at division of property; and
• Whether any party will be serving as the custodian of any minor children.

The fewer issues to litigate the better off both parties will be, emotionally and financially. It is in the best interest of those involved to work together in devising a fair and equitable property settlement agreement to forego the need for lengthy and expensive litigation. These agreements are enforceable and can solve a lot of problems in the future.

MacElree Harvey
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