Division of Assets and Liabilities in a Divorce

Provided the parties cannot agree about how they’re going to divide their stuff Indiana has a rule. Pursuant to Indiana Code 31-15-7-5, “The court shall presume that an equal division of the marital property between the parties is just and reasonable. However, this presumption may be rebutted by a party who represents relevant evidence, including evidence concerning the following factors, that an equal division would not be just and reasonable:

(1) The contribution of each spouse to the acquisition of the property, regardless of whether the contribution was income producing.

(2) The extent by which the property was acquired by each spouse:

(A) before the marriage; or

(B) through inheritance or gift.

(3) The economic circumstances of each spouse at the time the disposition of the property is to become effective, including the desirability of awarding the family residence or the right to dwell in the family residence for such periods as the court considers just to the spouse having custody of any children.

(4) The conduct of the parties during the marriage as related to the disposition or dissipation of their property.

(5) The earnings or earning ability of the parties as related to:

(A) a final division of property; and

(B) a final determination of the property rights of the parties.”

As family law attorneys we must do our best to divide the marital property pursuant to this rule. The best way to do this is to prepare a marital balance sheet or spreadsheet that itemizes each piece of property, its fair market value and in whose column it shall belong.

It is beneficial for the parties if they can let cooler heads prevail and work with their attorneys to prepare the marital balance sheet. Set your personal sentiments aside. Otherwise, if the parties cannot agree, you will go to court and the judge will divide it up for you.

Pursuant to Indiana Code 31-15-7-4, “[T]he court shall divide the property of the parties, whether:

(1) Owned by either spouse before the marriage;

(2) Acquired by either spouse in his or her right:

(A) after the marriage; and

(B) before final separation of the parties; or

(3) Acquired by their joint efforts.

(b) The court shall divide the property in a just and reasonable manner by:

(1) Division of the property in kind;

(2) Setting the property or parts of the property over to one (1) of the spouses and requiring either spouse to pay an amount, either in gross or in installments, that is just and proper;

(3) Ordering the sale of the property under such conditions as the court prescribes and dividing the proceeds of the sale; or

(4) Ordering the distribution of benefits described in IC 31-9-2-98(b)(2) [pension or retirement benefits] or IC 31-9-2-98(b)(3) [retirement pay defined in 10 U.S.C. 1408(a)] that are payable after the dissolution of marriage, by setting aside to either of the parties a percentage of those payments either by assignment or in kind at the time of receipt.”

Simply put, if you go in front of a judge, the judge most likely will not care about your sentimental attachment or value of the marital property. Rather, the judge will divide it up pursuant to the above rules.

The Assets Must Be Divided in a Reasonable Manner

The assets or property must be divided in a reasonable manner, and you probably want to know what that means. Practically speaking, it can mean specific items are given to each party. For example, one spouse may get one car and the other spouse may get the other car. One spouse may get the bedroom suite and the other spouse may get the living room suite, one spouse may get the big screen TV and the other spouse may get the computer, etc.

A “Setoff” is a Potential Solution For Inequitable Distribution of Assets

When determining the “setoff” the marital balance sheet is put together as described above. Thus, “Husband’s” and “Wife’s” columns are added up so that a total monetary value of the property is determined. Then, looking at the bottom line, your attorney will determine if a sizable gap exists between the two values and whether the setoff can be used to balance out the division of the property. For example, if Husband’s column adds up to $150,000.00 and Wife’s column adds up to $50,000.00, then Wife may be entitled to a setoff in the amount of $50,000.00 to reasonably and equitably divide the value of the marital property.

Selling A Property With A Mortgage

What happens if both spouses are on a mortgage? Typically, if both spouses used their respective incomes to secure the mortgage and to pay the monthly mortgage bill, we must figure out how to reasonably divide this asset and liability. If neither spouse can afford the mortgage then the obvious solution would be to sell the house and divide the equity or liability.

Or You May Continue Using The Property And Keep Paying The Mortgage

Alternatively, one spouse may wish to refinance the mortgage into his or her sole name, thus removing the other spouse from the mortgage. Further, the spouse giving up the house would execute a quitclaim deed to the spouse who will keep it, therefore giving up the legal right of ownership of the property. In this situation, the issue of the division of the equity or liability must be addressed to ensure both spouses maintain an equal financial footing.

A Business is Treated in a Similar Fashion In The Division of Assets

Dividing a business is a very complicated issue. Often times a Certified Public Accountant is hired to do a business valuation.

Also, the type of business structure is important to the issue of division. Is the business a partnership between the spouses or is it a type of corporation involving only one spouse?

This is a highly fact-sensitive issue that should be discussed in depth with your attorney and CPA.