When a couple divorces, they often expect and are prepared to deal with the dissolution of their marital relationship. Along with this, however, a divorcing couple must also deal with the dissolution of their financial relationship, which can often be complex and rife with disputes. Settling the couple’s financial relationship (which the courts call “property division”) can occur in two ways: (1) the couple can negotiate, draft, and have the court execute a Property Settlement Agreement voluntarily signed by each party; or (2) the couple may ask the courts help and allow the court to determine how the couple’s property (assets and debts) will be dealt with.
When circumstances allow for it, the voluntary execution of a Property Settlement Agreement is encouraged for a variety of reasons. Not only does proceeding in this way minimize court costs and time expended by those involved, but it also affords the individuals the opportunity to amicably resolve the various issues between them. In addition to the division of property, the Property Settlement Agreement may also address as appropriate child custody, visitation, child support and spousal support, along with the maintenance of health insurance, among other things. Of course, when considering entering into a voluntary Property Settlement Agreement, it is strongly advised that one consult with a skilled and experienced attorney, so as to ensure that the agreement is drafted fairly and reasonably and is executed properly.
If the couple fails to reach an agreement, then the court can step in if one party files suit. The Commonwealth of Virginia is referred to as an “equitable distribution” state, meaning that the court will attempt to divide the marital assets and/or debts in a fair and equitable manner. As there is no fixed rule or equation in determining how to distribute the property, the court instead determines the character of the property involved (marital or separate), as well as its value, and then weighs eleven different factors in order to determine how such property will be divided, or equitably distributed. The factors considered by the court include the duration of the marriage, the age, health, occupation, and earning potential of each spouse, the contributions (both monetary and nonmonetary) that each party made to the family and the marital property, the circumstances leading to the divorce, and the debts and liabilities of each individual.
The first step for the Court is to determine the character of each property in accordance with Virginia law. Property can be classified as either marital or separate; the distinction is important as only the marital property will be distributed by the court. While Virginia Code § 20-107.3 thoroughly details the distinction between marital and separate property, marital property can effectively be defined as those monies earned during the marriage and all property acquired with those earnings. Separate property includes gifts or inheritance provided to one spouse only, as well as property acquired prior to the marriage. However, it is important to note that not only can property be mixed – both marital and separate – but also that separate property can be transmuted into marital property, something which often becomes hotly contested.
After determining the character of the parties’ various properties, which can vary in nature from furniture or vehicles, or real estate and business shares, the court will then assign values to each property. While in some cases it is fairly simple to determine the value of a given property, such as when the marital home is appraised, determining the value of a property can often be quite complex and disputed by those involved. In that case, each party will submit evidence and retain experts as to the value that they believe the property has; they may have those retained experts testify, and the court will then use its discretion to assign property values.
Once all of the couples’ property has been characterized and valued, the court will consider the factors enumerated in Virginia Code § 20-107.3 and determine the amount of any division or transfer of marital property and/or debt, as well as the amount of any monetary award, how the marital debts will be divided, and how any applicable payment will be made. In the case of real property, such division often occurs in one of three ways: (1) if the property can be partitioned, then it may be divided equally among the two parties; (2) one spouse may “buy-out” the other by purchasing the whole property; or (3) the property may be sold and the proceeds then divided amongst the parties.
Even with this brief background information, it goes without saying that property division – whether it be via a voluntarily executed Property Settlement Agreement, or by order of the court – can be quite complex and may often involve a number of disputes. As such, if you have, or are contemplating, a separation or divorce, please do not hesitate to contact our experienced attorneys, who can help walk you through this often confusing and complex process.