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Marital property, separate property and what’s in between

On Behalf of | Apr 30, 2020 | Divorce |

Like most states, Virginia follows the “equitable distribution” model when dividing property in divorce. In this sense, “equitable” does not mean “equal,” and all the divorced couple’s property is not necessarily split 50-50. Instead, the law requires the parties to list all their assets, divide personal property from marital property, and then each party should get a share of the marital property that is equitable, or fair.

This is the basic idea behind property division in Virginia divorce. However, the picture can look very complicated when you get down to the details and try to apply the basic principle to a specific situation.

One complicating factor is the fact that some types of assets fall in between separate and marital property. Virginia law refers to these assets as “part separate, part marital.” To explain what this means, first consider the differences between separate and marital property.

Separate property generally means all assets acquired by an individual spouse prior to the marriage. It may also include assets acquired by that individual during the marriage through inheritance or gift from someone other than the other spouse.

The marital property generally covers everything else acquired during the marriage, including jointly-owned property (like a house that is registered in the names of both spouses) as well as retirement accounts and other assets that are listed in the name of only one spouse.

Over the course of a marriage, especially a longer marriage, the two types of assets can be co-mingled. For instance, one spouse may inherit money and deposit it in a joint checking account, where both spouses use it to purchase assets for their shared home. In a divorce, they must find a way to divide this inheritance from the marital property.

In-between property can be even more complicated. For instance, imagine a marriage where one spouse owns a business before the marriage. The business could be considered separate property. Now imagine that the marriage lasts 20 years, and during that time the other spouse takes over management of the business and through hard work, smart choices and good luck, makes the business highly successful. When the couple decides to dissolve their marriage, should the hard-working manager spouse lose all the value they added to the business just because the other spouse owned it before the marriage?

In this situation a court might decide that the business is part separate, part marital property. Even if one spouse owned the business before the marriage, or inherited it during the marriage, if both spouses worked for the business, their income becomes part of  the marital property. If the business grows in value due partly to the efforts of one spouse, that spouse deserves a share of the increased value.

This is one reason why the process of divorce can be more complicated for high-asset couples than for people of more average means. Property division becomes more complicated when there are more assets to be divided, and when the assets are more complicated by nature. When the assets include ownership in a business, property division can require calling in professionals to put a value on the business, followed by painstaking negotiation to make sure each party gets a fair share of that value.



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