Family Law Unit 6: Division Of Marital Property At Dissolution

Front 1

Property Regimes During Marriage: Title Theory

Back 1

• Equitable distribution now required on dissolution.
• Spouse who holds title to each asset retains ownership of it. Can overlook contributions of homemaking spouse, W often got little.
• Can dispose of anything titled in your name, BUT careful of preemptive strike before divorce.
• All states remaining with this regime limit the application to the life of the marriage.

Front 2

Property Regimes During Marriage: Community Property

Back 2

• 9 states, notably CA
• Each spouse has a vested, 50% interest in all property acquired during the marriage (not the same as each getting half).
• But during marriage, separate and community property are distinguished.
• Separate: acquired before marriage, or during by gift, bequest, devise, OR where made clear that it is maintained as S, OR titled.
• Community: neither spouse may dispose of it without other's consent.

Front 3

Distribution Regimes at Divorce

Back 3

1) Equitable distribution,

2) Community Property, (today, really similar results),

Front 4

Equitable Distribution

Back 4

Marriage = partnership where both spouses make valuable contributions. Allows high judicial discretion; equitable DOES NOT mean equal.aM

Statutes in each state provide guidance based on 2 important principals: 1) allocate in proportion to spousal contributions to the property's acquisition, 2) allocate according to relative spousal need.

Front 5

Hotchpot or Kitchen Sink Approach (UMDA approach)

Back 5

14 states. No need to characterize property as martial or separate. Can divide all property, regardless of how, when, or whom acquired.

Can exacerbate disputes about how to distribute equitably. Proponents argue makes equity easier to achieve.

Front 6

Characterizing Assets as Marital or Separate

Back 6

Threshold inquiry everywhere except hotchpot, plus besides there courts MUST award all separate property to the individual it belongs to.

Marital property should be broadly construed; separate narrowly construed.

Front 7

Separate Property Becoming Marital

Back 7

Co-mingling: S becomes M where commingled with other spouse's property.

Transmutation: S treated in such a way that it shows and intention to become M.

Both create rebuttable presumption of marital.

Front 8

Considering Marital vs. Economic Fault in ED

Back 8

Marital: previously considered in property division. Now only about 50% consider, 25% exclude. But practically can be in judge's mind.

Economic: Where one spouse tries to deceive the other by hiding assets. Important factor. Advise clients to be cautious against this.

Front 9

Appreciation: Active vs. Passive

Back 9

EX: You have titled in your name a large stock portfolio. Sometimes the appreciation can become an M asset to be divided.

Active appreciation: if non-owner spouse is making all the monetary decisions, they will be entitled to a portion of the appreciation. Must provide substantial services. Consider: value of their services, lack of compensation, occurred during the marriage, substance (did broker assist? or did they act independently?)

Passive: Inflation, changing economy. They didn't contribute --> no right. Also no right if they're giving bad advice.

Front 10

Nack (classifying as S or M property)

Back 10

H diputes marital classification of:

• Investment portfolio: affirmed M because commingled funds from both spouses.
• Mercedes: Reversed, S because acquired before marriage.
• Lexus: Reversed, S because of pre-nip provision, plus titled in H's name, plus possibly purchased with just H's funds.
• Buffalo and Farm Equip: Affirmed M even though pre-nup to the contrary. No good records plus anything purchased with marital funds presumed marital.

Front 11

Pre-nups and classification

Back 11

Not always enforced because of judicial discretion in equitable distribution.

Front 12

Middendorf (Appreciation of separate property during marriage)

Back 12

H owned stockyard. Held: appreciation on the yard was a marital asset to be divided. Where S property increases in value, the appreciation becomes marital property if it is ACTIVE. Both spouses do NOT have to expend funds to contribute to appreciation, only one and still M property. If passive, then only the separate property owner would benefit.

Front 13

Homemaker Contributions

Back 13

ED of marital assets in title states recognizes homemaker contributions. But problematic to valuate.

Consider: cost of replacing HM services with market labor, lost opportunity costs of HM by not working, econometric models. Some courts depart from pure economics and consider the far-reaching impact of these contributions.

Lost Opportunity: has to be reasonable, not a pipe dream. W can't simply say she would've been a doctor, look at whether she was on that path.

Front 14

New Property: Professional Licenses, Degrees, and Future Earning Capacity

Back 14

The majority rule is that a degree or license is NOT property for ED. The value of a professional degree is simply your enhanced earnings. (Holterman is the exception.)

Front 15

Holterman (Factors in ED, degree as divisible property)

Back 15

Court reached minority conclusion that H's medical degree was distributable where HM wife had poor health; shows discretion. Outlines 5 important ED factors:

1. Income/property of each spouse on marriage/divorce
2. Marriage duration
3. Age/health of the parties (stressed this)
4. Any maintenance award
5. Non-titled spouse's contributions to the marriage

Front 16

Ketterle (Nobel prize as divisible property)

Back 16

H contested division of his NPP and W's general award as disproportionate. Affirmed; shows that equitable doesn't mean equal, court was free to focus on W's inability to earn wage post-marriage. Unless plainly wrong/excessive not reversed on appeal.

Front 17

Debt

Back 17

General presumption is that debt incurred by either spouse during the marriage is community; rebuttable if clear evidence that the debt was not for community (marital) benefit.

See Sunkidd Venture, W was liable for lease signed only by H.

Front 18

Goodwill, Personal vs. Professional

Back 18

The value of the business that exceeds its combined assets. The gap between the book value and the actual business.

Personal goodwill: NOT transferable or divisible; based on personal attributes of the individual (ex: celebrity face or image)

Professional/Enterprise goodwill: IS transferable and divisible. (ex: relationships with employees, customers, suppliers, reputations.)