When you get married, the law recognizes you and your spouse as a single person (or “entity”), rather than two. For example, when two single people own a piece of property together, under the law they are “joint tenants” and each has a one-half interest in the property. If one of the two people dies, their one-half interest will pass according to their will or according to state law if they don’t have a will. The surviving person would only get the property if the deceased person left a will and left his or her share of the property to the survivor.
Then, if the two people in our scenario get married, under the law they can hold title to the property as “joint tenants with the right of survivorship.” Those words are like magic. They mean that in the eyes of the law, the two people are recognized as one. If one of the two people in this situation dies, the whole property automatically becomes the property of the survivor. No will is even needed. No new deed is needed. Nothing is needed for the property to be wholly owned by the surviving partner, nothing except the magic words, “with the right of survivorship.” This can complicate the division of property when a couple decides to divorce.
In order to figure out what property you have, who it belongs to, and how to divide it in a divorce, I recommend the following four-step process:
- Make a list all property belonging to you and your spouse
- Classify the property as separate, marital, or hybrid (some of each)
- Value the property (by agreement or with expert witnesses)
- Divide the property (by agreement or in litigation)
First, start with listing all property. Your list will include the following:
- marital home and any other real estate acquired during the marriage
- any joint bank accounts
- investment accounts
- retirement accounts
- 401(k)s and pensions
- motor vehicles
- household furniture and furnishings
- art work
Next, “classify” the property. Is it separate, marital, or hybrid. Here are
definitions of each of these to help you determine the classification of your property:
Separate property is classified as:
- Any property acquired before the marriage
- Any property acquired during the marriage by inheritance or from a source other than your spouse that has been kept separate
- Property acquired after the date of separation
Marital property is classified as:
- Any property titled in the name of both parties (except possibly re-titled property)
- Any property acquired during the marriage which is not separate property
Hybrid property is classified as:
- Any property owned before the marriage that has increased significantly in value during the marriage due to the efforts of either party or the addition of marital property
- Any property acquired by one spouse during the marriage by gift or inheritance which has been combined with marital property (like using an inheritance to pay off the mortgage on the marital home)
Once the assets are listed and classified, they next need to be valued. The value can be an amount the parties mutually agree on or appraisals can be made to determine current fair market value. When you and your spouse can’t agree on the values of real estate, or investment accounts, or business ownership interest, sometimes experts have to be hired to do appraisals and evaluations and then come to court to testify. Then a judge will make a “finding” of what the value is based on the evidence presented in court.
The final step is dividing the property. Again, this is achieved by agreement between you and your spouse or by litigation if you can’t agree. My challenge to you is to go through your situation with a trusted lawyer and do a serious cost-benefit analysis to figure out the best way to get to resolution for you. You need to factor in the cost of litigation if you can’t agree and end up going to court.
Comments or Questions?