How are Assets Divided in Divorce

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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 “Wild West” of Divorce Law Concerning Real Estate in Virginia

For many years, the courts and bar have been trying to figure out the best way to equitably (i.e. “fairly”) divide and distribute the equity value of a divorcing couple’s residence (and other real estate) when there has been a commingling of marital and separate (non-marital) funds[1]. Once property has been “commingled”, it is usually looked upon, by Virginia Courts, as “hybrid property” (part separate, part marital property). Hybrid property questions, when it comes to the marital residence and real estate in general, often arise in the following situations:

If one party uses his or her pre-marital cash as the down payment on the marital residence, does he or she get that money back when there is divorce?
If the party making the down payment, out of premarital money, is to get that money back in a divorce, is there a fair calculation available to figure out how much that original down payment is worth today?
How is money earned during the marriage, which is used to pay the monthly mortgage bill (plus homeowner’s insurance and real estate taxes) accounted for when the equity value of the marital residence is divided and distributed in a divorce?
How are improvements to the marital residence accounted for?
What is the effect on the division and distribution of the equity in the marital residence, upon divorce, if one party uses his or her separate (non-marital) funds to pay for improvements to the residence?
What happens when one party owns a home prior to the divorce, which is then utilized by the parties as their marital residence and, while the parties are married, the mortgage, etc.