When Property Division in Divorce is Complicated

Posted on Aug 1, 2013 by Katie Carter

Some property disputes are just plain more complicated than others. In Virginia, property division after divorce is handled by a statute. The way we do it is called “equitable distribution,” which means, basically, that property is divided mostly 50/50, but that the judge has the freedom to listen to the evidence presented by the parties and make a final determination about what’s “fair” under the circumstances. As you can probably imagine, 50/50 doesn’t always work. In most circumstances, though, property is divided relatively close to 50/50.

So, why is it complicated? Well, in general, property is divided into three categories: (1) marital, (2) separate, and (3) hybrid. If the property is marital or separate, it’s not that hard. If it’s separate, the person to whom it belongs keeps it even after divorce. If it’s marital, the property is divided equitably (but probably close to 50/50).

Hybrid property is where some of the difficulty comes in. A hybrid asset is one that is part marital and part separate. This happens most often with assets like homes and retirement accounts. Let’s say, for example, that you owned a condo prior to your marriage, and the condo was worth $200,000. When you got married, you sold your condo, and used your $200,000 to pay the down payment on the marital home, where you and your husband lived during your marriage. During your marriage, you made mortgage payments together and your husband even made some pretty substantial improvements to the place. He remodeled a bathroom, installed a deck off the sunroom, and updated some old school looking tiling on your kitchen floor. This is a hybrid asset. You have a separate interest in your separate contribution, the $200,000, and in any increase in equity this initial investment caused to accrue. Your husband, though, still has an interest in the home as well. The monthly mortgage payments were marital, and his improvements also count as something the court calls “sweat equity.” But how much is his interest? That’s where things get complicated.

Sometimes, even determining value for an asset is tricky. It’s easy with assets like 401(k)s, where the value is what is in the account (provided, of course, that no mysterious loans have been taken out). But with real property, sometimes agreeing on a value is a difficult thing—because the city appraisal is different from what an independent appraiser would tell you. It’s complicated. And, if one party wants to keep the asset and the other wants to sell, you could be motivated to want to go with a higher or a lower appraisal on the asset. It gets tricky. There are other assets that can be complicated to determine value, too. Some assets, like stock options, may not reach their full value until some later date. If you have something for which value is difficult to determine, like an original piece of artwork, you may face some problems in property division. How do you accurately determine value and make sure you’re getting your fair share?

Property division is probably the most complicated when there is a business involved. If you or your husband currently own a business, you’ll need to determine an appropriate value for the business in order to give your spouse his or her share in it. Sound complicated? It is! We often employ experts trained in business valuation to help us.

If your property distribution is complicated, it’s a good idea to meet with a Virginia attorney to figure out what the best way is to divide these assets.