Equitable Distribution of Marital Property

Equitable Distribution of Marital Property

South Carolina is not a community property state.  Rather, in South Carolina, the family courts equitably divide property that is marital.  Determining what property is marital, and determining an equitable divorce property settlement agreement, are tasks that benefit from experienced counsel’s assistance.

The Four Steps of Equitable Divorce Property Division

The family court goes through four steps dealing with divorce property division: 1) identify the parties’ property; 2) separate the marital from the non-marital property; 3) value the property; 4) equitably divided the marital property, ending with a divorce property settlement agreement.  While all four of these steps appear straightforward, each can have complications.

Identify the parties’ property

The first step is to identify all property that either party has as of the date of filing of the marital dissolution action.  The family court will not concern itself with property that one party disposed of long ago even if the disposition undermined the parties’ economic circumstances.  However, there are exceptions to this general rule.  Property that is transferred to a third-party with the intent of hiding it from a spouse can be added back into the marital estate although this may require adding the third-party as a defendant to the marital litigation.  Property that is disposed of in anticipation of marital litigation can also be added back into the marital estate (experienced attorneys look to see if one party paid the initial retainer from a source that can be added back into the marital estate).  Unvested interests in property can be included in the marital estate.

Separating marital from non-marital property

The family court’s divorce property division services can divide marital property no matter whose name the asset is titled in.  The family court cannot divide non-marital property.  Thus determining which property is marital is an essential step in equitable distribution.

Absent a prenuptial agreement holding otherwise, marital property is generally property accumulated by either spouse during the marriage.   However property accumulated during the marriage via gift or bequest from third-parties is not marital property, and not subject to divorce property division.  Property owned by one party prior to the marriage (or gifted or inherited from third-parties during the marriage) is typically not considered marital property.  However such non-marital property can become marital property if it is so commingled with marital property that it can no longer be identified.   It can also become marital property if it is transmuted, treated by the spouses as common property of the marriage.  Some of the biggest divorce property settlement agreement disputes are over whether non-marital property has been transmuted.

Valuing the property

After property of the parties has been identified and divided into marital and non-marital items, the next step is to value it.  While valuation of non-marital property isn’t as critical as valuing the marital property, the value of non-marital property is one of the factors in equitable distribution.  Thus such property needs to be valued before any divorce property settlement agreement can be reached. .

Valuation is as of the date of filing, not the date of the equitable distribution.  However there is an exception for passive increases or decreases in the value of this property between the date of filing and the date of distribution. This can lead to disputes over whether a change in value is passive or active.  If a spouse drives a vehicle during this period, causing the value of the vehicle to depreciate, is this an active or passive loss?  If one spouse pays the marital home mortgage during this period and the value of the house goes up, is this an active or passive gain?

There are numerous potential disputes over the value of property.  Often spouses undervalue property they wish to keep and overvalue property they wish the other side to keep.  Experienced attorneys have strategies to ensure that the valuations work to their clients’ benefit.

Equitably dividing the marital property

The final step in the process is to equably divide the marital property.  South Carolina provides fifteen factors for the court to consider in equitable distribution.  For lengthy marriages, there is a presumption of a 50-50 divorce property division of the marital estate, with the courts able to deviate slightly from this division.  There is no such presumption for short marriages.

Even a 50-50 divorce property division does not mean that each party will keep one-half of every item.  Rather the court tries to make a sensible division of the marital estate that accomplishes its goal of awarding each spouse a set percentage of the estate.  Typically, it makes sense to leave each spouse with his or her own property and have a transfer of money or retirement accounts to accomplish the equitable divorce property division.

How to divide property in which both spouses are obligated on the debt, as is often the case with the marital home or vehicles, can be some of the trickiest parts of a divorce property settlement agreement.  The court typically wishes to separate the parties’ finances as part of an equitable distribution award.  This can be hard to accomplish when there is joint debt.  There are cases in which it has taken five to ten years to sell a marital home that the family court wanted sold immediately.  An experienced family court attorney can help a party avoid this pitfall.

Finally some spouses, typically those who worked for large corporations, government, or the military, have defined benefit pensions. Rather than value and divide these pensions the court typically awards the other spouse a set portion of that pension and this spouse’s interest in that pension will be protected through a separate order, called a Qualified Domestic Relations Order (QDRO).

Divorce Property Division Conclusion

There are numerous intricacies in the equitable distribution of a marital property settlement agreement.  Having an experienced, knowledgeable attorney advocating one’s position in equitable distribution or divorce property settlement agreement, can be a valuable service in almost any equitable distribution case.

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