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Protecting Marital Assets in a Divorce

MARITAL PROPERTY

What is "Marital Property"?  Generally, it's anything that you acquired during the marriage.  There are important exceptions, mostly items which are Non-Marital Property.  Those things include anything you owned before the marriage, anything inherited by you before or during the marriage and anything which was a gift specifically to you for your exclusive enjoyment (i.e, diamond earrings, fur coat, etc.)  Non-Marital Property and how to protect it is discussed in greater detail here.

Returning our attention to Marital Property, this is usually going to be any houses or other real estate, cars, vehicles, stocks, cash, retirement funds, pensions, business interests, personal property and other items of value acquired or accumulated during the marriage.

In the Non-Marital Property section, we discuss how assets that have mixed natures (being both marital AND non-marital) are "traced" to separate their values for division or assignment.

Kentucky law requires the court to divide all marital property in just proportions. In most cases, this will mean equally. The spouse that stayed home and cared for the house and children is usually deemed to have contributed just as much to the marriage and marital assets as the spouse whose name appears on the weekly paycheck.

In order for the court to make an equitable division of your marital property, it must first know what constitutes the marital property.  In all Kentucky divorce cases, both parties are required to file Verified Disclosure Statements.  They are quite detailed and sometimes overwhelming in appearance.  But your involvement in identifying all assets (both marital and non-marital) is essential.  The subject areas included in the Verified Disclosure Statement form include:

  • Background information on the parties, their marriage, their children, childcare costs, health and dental insurance costs for the children, income and employment information
  • Identification of all non-marital property claims, including fair market value at the time of marriage and the time of divorce and an explanation of the non-marital nature of each item
  • Real estate owned by both or either of the parties (both marital and non-marital), including fair market values, current mortgage balances and current interest rates
  • Vehicles, motorcycles, boats and watercraft, trailers, farm equipment, aircraft and generally anything that "moves".  Again, the fair market value and current loan balances must be disclosed
  • Bank accounts, certificates of deposit, money market accounts, etc., including current balances
  • Investments, including stocks, bonds, mutual funds, stock options, etc., with a description of each, the number of shares involves and the current fair market value
  • Life insurance, disclosing the name of the party insured, any cash surrender value and any present loan balances
  • Assets held on behalf of the parties' children (usually bank accounts, savings bonds, sometimes automobiles, etc.)
  • Retirement plans, pensions, 401(k) and IRA accounts, tax deferred savings accounts, etc., with the name of the Plan Administrator and the current balance or value
  • Interests in or ownership of businesses, including professional or medical practices, sole proprietorships, closely-held family enterprises, corporations, partnerships and other entities
  • Household property includes all the furniture, furnishings, decor items, appliances, kitchen utensils, pots and pans, linens, gardening equipment, lawn care equipment and everything else that a house usually contains.  Only rarely is it necessary to do an itemized inventory of everything in the house and occasionally the household property will have to be appraised.  But still, it is often important for your attorney and the court to know what is in your house.  Photographs can sometimes be used instead of a full-blown inventory.
  • Safe deposit box contents have to be identified and a value assigned.
  • Other property items have to be in this Disclosure, which includes jewelry, furs, antiques, art, collectibles, country club memberships, season tickets, income tax refunds expected, frequent flyer miles, accounts receivable (loans), claims against others (pending litigation, for instance), accrued vacation pay, hobby equipment, tools, sporting equipment, etc.
  • Debts (both marital and non-marital) have to be identified as well, listing the name of the creditor, the reason for the indebtedness, the current balance owed and the monthly payments due.
  • Monthly expenses for the party completing the Disclosure -- NOT including the children's expenses or the other party's expenses -- is a critical part of this process.  Think of this section as a "budget".  Identify what you are currently paying for your mortgage and what you anticipate you will be paying after the divorce.  Other expense categories include homeowners insurance; taxes; house maintenance; utilities; cell phone costs; yard expenses; cable television; internet access; car payments; auto expenses such as gas and oil; religious or charitable contributions usually made; personal expenses such as clothing, uniforms, dry cleaning, entertainment, food, medical/dental expenses, eye care and glasses, newspaper or magazine subscriptions, veterinarian and pet expenses, dues and club memberships, hair care, your unreimbursed school or tuition expenses, child support for children other than from this marriage or maintenance paid to a former spouse, athletic and activity fees, debt payments not identified in the "Debts" section above, and so forth.
  • Your Verified Disclosure Statement must be made under oath and your signature has to be notarized.
  • The required attachments to a Verified Disclosure Statement include:
    • Your three most recent paycheck stubs
    • Your most recent W-2s and 1099s
    • Your three most recent state and federal income tax returns
  • Additional documentation will likely be necessary, including bank statements, credit card bills, documentation of debts, vehicle titles, property ownership records, etc.

Fair Market Values

Used personal property has far less value than we like to think.  The real "value" is what it could be sold for at an auction or in a yard sale -- not the replacement cost or its purchase price.  In other words, what a willing seller would accept from a willing buyer.

Dividing Marital Property by Agreement

You and your spouse will always do well to divide your marital possessions and decide ultimate ownership of personal property, especially items like used furniture, appliances, TVs and stereos. Such property must be appraised if there is no agreement, and this can be expensive.

Most people are dissatisfied with the values assigned by court-appointed appraisers.  Unless we're talking about real estate or truly valuable antiques, collectibles, jewelry, etc., it is usually to your advantage to sit down with your spouse and agree who gets what.

We often recommend using an "alternate selection" process.  The parties flip a coin to see who goes first.  Party #1 takes the one item he/she most wants.  Party #2 then chooses the two items he/she most wants.  Then, the parties take turns selecting items until all the personal property is divided or only items they cannot agree upon remain.

Before you "declare war" over items of marital property, you have to consider if you are willing to potentially spend more than the items are worth in attorney fees, appraisal costs, etc. to get them.

But What If We Can't Agree?

It happens.  Sometimes the two parties are in such high-conflict modes that they cannot agree on the time of day.  We see it all too often.  There are several alternatives for resolving these disputes:

Mediation -- This is usually the first choice.  85% of all disputed divorce cases are settled in mediation.  We've devoted a whole page on this website to the mediation process but, in a nutshell, the parties and their attorneys choose an experienced Family Law attorney or retired Judge to help them reach an agreement on disputed issues.

Collaboration -- This is a fairly new approach to Family Law and we explain it more fully elsewhere in this website.  Attorneys practicing Collaborative Law have to complete unique legal training.  (See the "Collaborative Law" section for further explanation.)  The parties and their attorneys agree in writing that they are NOT going to go to the Court with motions, hearings and trials.  They make a commitment to work out a solution amongst themselves.  If either of the parties decides to break the agreement by filing motions with the Court, then both parties have to discharge their lawyers and start all over again (usually at significant expense) with new attorneys.  This is usually enough incentive for the parties to stick to the collaborative law process.

Arbitration -- Arbitration is not used every day in divorce cases but it is appropriate in certain instances.  See the "Arbitration" section here for more details but, in essense, the parties and their counsel agree on an Arbitrator who will hear the parties' positions and he/she will make a recommendation to the Court as to how to resolve the issue.  Generally, the Court will accept the Arbitrator's recommendation and make it an official order of the Court.

Litigation -- Filing motions, holding hearings, bringing in witnesses and holding a full-day or multi-day trial are always going to be your most labor-intensive and expensive option.  Further, you give up most input you might have to come up with a creative solution that is in the best interests of everyone involved.  The litigation process is more fully explained elsewhere in this website.

Every Family Law situation is unique.  But there are many techniques we can utilize to protect your interests in marital assets.  Please talk to us about these concerns during your initial consultation.