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Dividing and distributing assets in a Virginia divorce is a four-step process:
- Identify and determine ownership of the asset;
- Determine the value of the asset;
- Classify the asset (does it belong to the marriage or to an individual spouse); and
- Reach mutual agreement on how the asset will be divided using the law as a guideline, being mindful of tax implications, and assessing fairness considering a variety of factors, both financial and non-financial.
The “bible” of division and distribution of assets and debt, in a Virginia divorce, is Section 20-107.3 of the Virginia Code.
Determining how assets are divided in a Virginia divorce mediation is particularly challenging in two situations:
- When the marital estate is complex - You will need a mediator with the financial skills and experience to understand the variety of assets and debts that are presented in sophisticated financial situations; and
- When there is not enough money to support two households - You will need a mediator with the financial skills and sensitivity to help couples navigate a divorce when the money is scarce (including career planning and budgeting when necessary).
What is considered and determined during your Virginia divorce mediation on asset division at Graine Mediation.
- Percentage-based division? We discuss whether the parties have a “philosophy” about division and distribution of their assets/debts (e.g., 50%/50%; each keep what is in their names, etc.)
- 5 Key Factors We always need to factor for 5 matters:
- Identify the asset or debt (real estate, brokerage account, 401(k), credit card debt, etc.)
- Determine legal ownership and whether the property is free and clear (i.e., are there liens)
- Determine value - sometimes agreed, sometimes experts are needed, sometimes it is simply a bank balance, etc.
- Determine classification:
- Marital Property = acquired during the marriage and prior to the parties’ separation
- Separate Property = acquired before the marriage and not commingled with marital property (very complex area of the law if there is commingling), acquired by gift to just one of the parties, acquired by inheritance, and/or acquired after separation
- Hybrid Property = has characteristics of both marital and separate property. This is especially important to understand when it comes to real estate.
- Determine how the assets and debts will be shared between the parties. This is usually based on four primary factors:
- whether the clients believe that a 50/50 split of the assets is mutually agreeable. This is a very common way of dividing assets and, to a certain extent, debts. This is not, however, what the law says. In Virginia, marital assets and debts are to be divided “equitably” (which is not always the same as “equally”).
- discussions related to classification (paragraph 4, above);
- financial and non-financial contributions to the marriage; and
- factors which led to the deterioration of the marriage (these types of “behavioral issues” are usually emphasized to a lesser extent than most attorneys would lead you to believe … since there are lot of attorney fees to had when “bad behavior” becomes a big feature in your divorce).
There is a lot to decide and consider. Settling a divorce is complicated. That is why you will want to consider divorce mediation versus litigation. Litigation will add a whole second layer of complexity in the form of counterintuitive procedural rules, legal gymnastics and very expensive tactical maneuvers.
Rules of thumb to help you make decisions about dividing assets in a Virginia divorce mediation
Perhaps the most frustrating part of dividing assets in a Virginia divorce mediation is that the rules are not clear. There are, however, rules of thumb to help guide you through this part of your divorce settlement. For example:
- a 50/50 split of marital assets is the norm;
- there is a well-respected formula to determine which portion of a retirement account belongs to the marriage and which does not, known as the coverture fraction);
- there is a popular method of teasing out one spouse’s pre-marital contribution to the family home, known as the “Brandenburg doctrine”.
A skilled mediator will help guide, focus, and keep you on track to make these important decisions about the division of your assets and debts in your Virginia divorce mediation.