Property Division in Virginia is also sometimes referred to as, “Equitable Distribution.” The relevant code section is Virginia Code § 20-107.3. This code section essentially describes how Virginia courts define and divide the property and debts of the spouses. Property Division or Equitable Distribution can include real and personal property, time-shares, as well as military retirements, pensions, 401(k) plans, TSP, and many other investments or assets of the parties as well. It can also include credit card debt or the amount owed on a house that is now worth less than what was paid for it.
One of the most important paragraphs in this code section reads, “Upon decreeing the dissolution of a marriage…or upon request of either party, the court (i) shall determine the legal title as between the parties, and the ownership and value of all property, real or personal, tangible or intangible, of the parties and shall consider which of such property is separate property, which is marital property, and which is part separate and part marital property…and (ii) shall determine the nature of all debts of the parties, or either of them, and shall consider which of such debts is separate debt and which is marital debit. VA Code § 20-107.3A.
In layman’s terms, what this means is that if the parties cannot agree on the division of property, a court will look at that property and determine the title and ownership of that property. To aid the court in this determination, however, the court will look at the property to see if it can be classified as one of three basic types of property: marital property, separate property or some hybrid combination (part marital and part separate).
Marital property is best understood as property acquired during the marriage that is not subject to a separate property exemption. It doesn’t really matter whose name is on the title…but rather when it was acquired. This basically means that both a husband and wife will have an equitable interest (or ownership) in property acquired during the marriage. For example, if a home is purchased during the marriage, in most cases, it is the property of both spouses – even if only one spouse’s name is on the deed.
Separate property is property (both real and personal) acquired by either party before the marriage or property acquired by one spouse during the marriage by inheritance or gift from a source other than the other spouse. It can also be property acquired after a separation but before a divorce. If a husband or wife brings property to the marriage and does not commingle that property with any marital property, but keeps it separate, it will remain the separate property of that spouse through the divorce. Similarly, if one spouse receives an inheritance during the marriage and keeps those funds in a separate account, it will most likely remain that spouse’s separate funds. Also, if a relative were to leave you an antique of some sort after that relative’s passing, that antique would legally be yours.
Some property starts out as separate property, but at some point during the marriage, it becomes part-marital. This is often referred to as hybrid property. A good example of hybrid property would be taking funds that were bequeathed to you in an inheritance and then using that money to buy your first house with your spouse along with funds that you and your spouse saved during the marriage. The inheritance money in this example would have been deposited into a joint banking account (also known as commingling) and then later used to the purchase the home on the closing date. Let’s say then that you and your spouse remained in the house for a few years, made payments on the mortgage using marital funds, made improvements to the home, and the home may have even increased in value during that time. The house would be classified during the divorce process as a hybrid property because it has been paid for with separate and marital funds – and both spouses would likely have an equitable interest in the home. It wouldn’t really matter if only one spouse’s name was on the deed. The good news is that Virginia is a “tracing” state. What that means is that if the origin of the funds can be traced back to where they came from and how the funds were applied, the court can then divide the property interest among the parties more equitably and according to the initial source of the funds and contributions made by each spouse to the property. This is sometimes a complicated process and may even require the testimony of an expert who can value the house appropriately.
Cars and personal property are also subject to similar analysis in property division. Instead of using a tax assessment or real estate appraiser, some folks look to the Blue Book value or some other metric. Personal property is sometimes complicated because it is valued at the market price at the time of analysis and not necessarily how much was paid for that personal property. With regard to personal property and cars, it is normally advisable for the parties to try to negotiate an amicable division of those assets. If that can’t be resolved by the parties, the court will often order that one person receive the asset and then order the receiving party to pay the non-receiving party a monetary award for the appropriate amount of its value. Sometimes, the court will order jointly owned property to be sold and simply divide the money between the parties. This can get somewhat complicated and as with so many aspects of a divorce case, it is best to discuss various property and debts with an attorney.
To slightly complicate matters, the court does not have authority to order the division or transfer of separate property or even marital property that is not jointly owned. The court will look to a list of factors to determine a monetary award, division or transfer of jointly owned marital property and the apportionment of debts. An attorney can give you specific advice with regard to the various properties and debts of a divorcing couple and how a court is likely to view those assets and liabilities.
What about Debt?
Debts are analyzed similar to the acquisition of property. For example separate debt is debt incurred by either party before the marriage or debt incurred after separation of the parties. If there was credit card debt accumulated during the marriage and it can be shown that the bulk of the charges were for maintaining the household, a court will likely view this as marital debt. Unfortunately for some, even bad investments or choices of one spouse will often be shared by the other spouse if the investments were made during the marriage.
Debt is one of the more contentious issues to work through in a divorce case. Since the housing market has been rather depressed in the past few years, many divorcing couples are arguing more over how to divide debts rather than how to divide assets and/or property interests. It is not uncommon for a home to be under-water…meaning that the home is worth less than the amount owed on the mortgage. This can be a particularly thorny issue because if the couple seeks to part ways and sell the home, they each may be on the hook for the amount owed on the mortgage that is not provided for in the sale of the home.
The good news is that there are often creative ways to negotiate the distribution of assets and liabilities. Seeking advice from an attorney can be especially beneficial because an attorney can explain how a court will likely view a particular asset or debt – and provide options on how to negotiate a fair resolution of the issue. Remember that property division can also have tax implications or even bankruptcy implications, in addition to how it can affect a divorce settlement. As with so many topics discussed on this website, do not rely solely on the information presented here…but rather seek the experience and counsel of a divorce attorney. Oftentimes, attorneys will look to valuation experts in the course of a case to insure that their clients are afforded the proper protections in valuing property and the division thereof. The last thing in the world you would want to find out years after your divorce case is final is that you could have negotiated for assets that were rightfully yours or debt that wasn’t technically your responsibility.