Chapter VII
MARITAL ESTATE DIVISION
A note of caution: Changes in divorce law are constant and can occur at any time either through new legislation or new state or federal court decisions. Each year, many such changes will occur. Your best and most current information will come from a lawyer who is competent in divorce practice and who keeps abreast of such changes and who is familiar with your own particular marital history.
| Atty/Client | Married? | Jurisdiction | Grounds | Children | Sep Prop | Contents | Alimony |
| Fees | Extrajuris | Procedure | Settlement | Trial | Misc | Shortcut | Moving On |
Identification & valuation of the estate Net marital estate
Severance of ownership, dominion & control Equitable division defined
Equal division not required Contributions & other factors Trial court inclinations
Methods of distribution In kind division Equitable division tools
Sale of property Lump sum judgment and judgment lien
Property division alimony Retirement account division Rights of creditors
Effects of bankruptcy Omitted property
Identification & Valuation of the Estate
On divorce, the court must equitably divide the marital estate between the parties, excluding from its equitable division the separate properties/debts of each spouse. See Chapter 6, Separate Property. If an item of property or debt exists at the time of divorce, if it not separate spousal property/debt, it is usually marital property/debt.
Exceptions may exist concerning property and debt acquired/incurred after the parties'
separation, especially if the separation is a very long one, or after the divorce case was filed.
Oklahoma case law supports three possible dates as to selecting the time that the marital
estate is fixed and valued - (1) at the earliest, the time the parties separated; (2) in the middle,
the time the divorce case was filed; and (3) at the end, the date of trial. However, it is also
possible that, in the same case, the court would utilize all three as to different assets. In the
following example, the parties have lived separately for two years with no intention of
resuming their marital life. The husband had acquired 800 shares of stock in Microsoft
Corporation, but under the following circumstances:
| Asset 1: 200 shares of stock purchased before separation worth $5,000 at separation, $10,000 at case filing and $12,000 at time of trial | Probable valuation and finding by the court: The property is marital and has a value of $12,000. No value increase was caused by the parties but by the market. |
| Asset 2: 200 shares of stock purchased at same time as Asset 1 but sold by husband around time of case filing for $10,000 which was placed in a bank account in the husband's name. | Probable valuation and finding by the court: The property was marital for reasons specified above, and the $10,000 in the husband's bank account is a marital asset. |
| Asset 3: 200 shares of stock in Microsoft purchased by husband after separation after case filing from repayment of a loan me made before separation | Probable valuation and finding by the court: The property is marital since the money used to purchase it was marital - the loan was a marital account receivable valued at $12,000. |
| Asset 4: 200 shares of stock in Microsoft purchased by husband after separation from earnings he made after separation | Probable finding by the court: The property is the husband's separate property since it was purchased from money earned by husband after separation. It has no marital estate value. |
Thoroughness in identifying marital assets and debts is important if division of the net marital estate is important to you. Some items are more obvious in such identification and valuation than others. For example, an unlitigated legal claim against third parties may be an item of marital estate. One spouse may have a claim against the other for restitution and return on investment for working and supporting the family while the other spouse attained a professional degree, thereby enabling that person to earn substantial income. Uncollected but earned income may exist in a spouse's business operation. You should be prepared to spend a considerable amount of time in assisting your attorney identify and value the items which may be present in your case.
Each item of property has value, i.e., monetary worth. Valuation basis of property in divorce cases is fair market value, that is, were the item of property to be sold "as is" by a willing seller to a willing buyer, what would the price be, under existing market conditions?
The value of a debt is the amount which is owed. However, if the creditor is not pursing collection or if the existence of the debt is disputed (as sometimes happens where parents advance money--is it a gift, or is it a loan?), such items may be discounted or excluded in the court's computations. The party who asserts the existence of a debt has the burden to prove that it exists.
Net Marital Estate Top of Chapter
The sum of all the values of all marital assets is the value of the "gross marital estate." The sum of all the values of all marital debts is the value of the "gross marital debt" (obviously, a negative number). The aggregate of the values of all marital properties and debts is the value of the "net marital estate." Generally, it is this net marital estate value which is equitably divided by the court - of the numerical value, the court will intend that each party receives an equitable proportion of that value.
Severance of Ownership, Dominion and Control Top of Chapter
On divorce, the trial court must sever any common title held by the spouses and distribute the marital estate so that the estate awarded to each spouse is owned only by one spouse and is outside the control and dominion of the other. Consequently, joint ownership will not continue upon divorce, unless the parties explicitly agree that joint ownership continue. See Chapter 10, Extrajurisdictional Agreements.
Equitable Division Top of Chapter
According to Oklahoma statutes, the trial court must divide this net marital estate in a "just and reasonable" manner. Appellate case law typically refers to the trial court's duty to effect an "equitable" division of such property and debt. These quoted terms are plainly imprecise, and, again, the trial court is granted wide discretion in determining the form, manner and proportion of division of the marital estate upon divorce. Recalling what was said in the Introduction, it is obvious that what is "equitable" will vary from one subjective opinion to another.
Equal Division Not Required Top of Chapter
Appellate case law makes clear that a trial court is not required to make a 50/50 (or any other particular percentage) division of the net marital estate between the spouses. Trial court decisions rendering grossly disproportionate (such as 70/30) property divisions have been affirmed at the appellate level. No particular proportionate division has been identified as being an abuse of discretion, per se. Theoretically, but unrealistically, it is conceivable that a 100/0 proportionate property division could be affirmed on appeal.
Contributions & Other Factors Top of Chapter
Having said this, it is also true Oklahoma case law does give partial definition concerning what may and may not be done in dividing the marital estate. Most appellate decisions indicate that the relative efforts and contributions of the parties should be considered in determining a division of the marital estate. Those efforts and contributions may be economic (such as working to build up a business) or domestic (such as rearing children).
Appellate court decisions clearly indicate that "need" of one spouse or the other is not a factor in determining an equitable division. "Fault" is not important, either.
However, waste or dissipation of marital assets by a spouse for non-marital purposes may be considered in deciding what equitable means in a particular case. Examples might be the husband spending $5,000 on a trip with his paramour or the wife wasting $5,000 at the racetrack.
Trial Court Inclinations Top of Chapter
Unless some waste or dissipation factor is present, most trial court judges are presently inclined to aim for about a 50/50 division of the net marital estate and are not particularly concerned with the relative contributions of the spouses. Typically, net property division will not usually be more proportionally divergent than 60/40.
Methods of Effecting the Division Top of Chapter
As long as severance of ownership and dominion between the parties is accomplished, the court possesses considerable latitude in deciding how, and when, that division should effectively occur.
In Kind Division Top of Chapter
Each case will involve a property division award which awards items of property and debt to each of the parties. Loudenback's Lay Divorce Guide refers to a division of existing properties and debts as an "in kind" division. In many cases, this will be the only type of property division order which is made. To accomplish this, the court simply awards to each party various items of marital property and debt, in accordance with what the court determines equitable to mean in the particular case.
Thus, if a trial court considered a 50/50 division to be appropriate in a particular case, and that a 50/50 division could be made by awarding certain assets and debts to each of the parties, an "in kind" award could be implemented simply by the order of the court which made such division, without more. The court would take care that the net awards of property and debt to each party were equivalent in terms of net value. Recall that proportionate division of the net marital estate is the object.
The following simplified example illustrates a 50/50 in-kind division of the net marital estate. The numbers reflected are the values which are established by the evidence in the case. In the hypothetical example, there are no other marital properties or debts.
Notice that separate (non-marital) property and debt values are not listed, nor should they be. Separate properties and debts are excluded from equitable division of the net marital estate.
This marital estate is worth $180,000: (Assets - Debts = Marital Estate Value)
($350,000 - $170,000 = $180,000)
EXAMPLE OF A 50/50 IN-KIND MARITAL ESTATE DIVISION
| Item of the Marital Estate | ||
| Award To Wife | ASSETS & VALUES | Award To Husband |
| $100,000 | 1. Marital Residence | |
| 20,000 | 2. Automobiles | |
| 30,000 | 3. General Motors Stock | |
| 4. Beachfront Condo | $185,000 | |
| 5. Automobile | 5,000 | |
| 6. Cash Deposits | 10,000 | |
| $150,000 | Assets To Each Party | $200,000 |
| DEBTS | ||
| $ 50,000 | 1. Residence Mortgage | |
| 10,000 | 2. Automobile Debt | |
| 3. Condo Debt | $105,000 | |
| 4. Automobile Debt | 5,000 | |
| $ 60,000 | Debts To Each Party | $110,000 |
| NET ESTATE DIVISION | ||
| $150,000 | 1. Asset Values To Each | $200,000 |
| (60,000) | 2. Debt Values To Each | (110,000) |
| $90,000 | 3. Net Division To Each | $90,000 |
Tools To Effect An Equitable Division Top of Chapter
The absence of a beachfront condominium is not the only matter which causes the preceding example to be unrealistic for many people. Very often, such a simple and expeditious method is not mathematically possible.
In the previous example, assume that the judge concluded that a 50/50 division was not "equitable" under the facts and circumstances of the case, but that division of 70% to the wife and 30% to the husband (or vice versa) should be made. The "in kind" division leaves the wife $36,000 short of a 70/30 division [Net Marital Estate x 70% = Trial Court Definition of "Equitable Award" to Wife; $180,000 x 70% = $126,000; "Equitable Award - "In Kind Award" = Wife's Deficit: $126,000 - $90,000 = $36,000].
Under such circumstances, the trial court would likely utilize one or more additional methods to effect the decision.
Sale of Property Top of Chapter
Upon divorce, the trial court has the power to order particular property to be sold and the net sale proceeds divided in such proportion as it decides is equitable. In this event, the court will ordinarily enter orders concerning the sale -- who is to do it, formula for determining "net sale proceeds", when it is to be accomplished, who is to have possession pending sale, who is to pay any outstanding debt pending sale and so on.
It is important that the trial court retain jurisdiction over the sale to supervise it and make any further needed orders until the sale be completed.
Lump Sum Judgment and Judgment Lien Top of Chapter
The court might consider it appropriate to defer the implementation of some part of its order until some future point in time. Perhaps, to make an equitable division, the court considers that the parties' home will need to be liquidated, but that it would be inequitable to force a present sale.
A typical cause for deferral is the economics associated with raising children. For example, assume that the wife will receive the custody of the parties' five minor children; that the monthly home mortgage payment is $400 per month; that equivalent and reasonable housing for the wife and children would cost $750 per month; and that economic reality is that a $750 per month payment could not be made, given the resources of the parties.
Under such (and other) circumstances, while the court might decide that the husband should be awarded a monetary interest in the home, it might also decide to defer his collection of that monetary interest until some future time.
To do this, the court could award the husband a judgment against the wife and a judgment lien against the home (securing payment of the judgment--similar in effect to a mortgage interest) in a specific amount of money (e.g., $30,000.00).
Or, the court could award a monetary judgment to the husband against the home, only. An award of a judgment lien against property but no corresponding personal judgment against the owning spouse leaves the non-owning spouse with the risk of loss. For example, should the property's value deteriorate after divorce and the house eventually sell for a price which is insufficient to satisfy the judgment lien of the non-owning spouse, a good argument can be made that the owning spouse owes the non-owing spouse no money.
The court would identify the point in time which the judgment against the wife and lien against the home would become collectible and enforceable by the husband. The court possesses great latitude in defining the period of postponement. Illustrative of the possibilities are: Two years (or other calendar time definition) after the date of the divorce; when the youngest child becomes eighteen years of age; when the wife remarries, or ceases to use the home as her residence, or sells the property, or dies, or defaults in the mortgage payments, or files for bankruptcy. Usually, several alternative times will be described, together with language, "whichever event occurs first."
At the option the court, the judgment may, or may not, accrue interest during the period of postponement.
Quite obviously there are competing equities present under such circumstances. The non-custodial parent may argue, with cause, that it is unfair that his/her spouse be awarded his/her portion of the property division now but defer a significant portion of the non-custodial parent's property division until a later time, perhaps many years beyond the date of the divorce.
Even so, the court might conclude that a present liquidation of the home may seriously and adversely impact the children's welfare. Under such circumstances, the fairness which is clearly apparent in the non-custodial spouse's reasoning often yields to consideration of the children's interests during their minority years.
Property Division Alimony Top of Chapter
Property division alimony is not the same as, and is to be differentiated from, alimony for support. See Chapter 8, Support Alimony. Standard dictionaries define "alimony" as "support" and "maintenance."
However, both Oklahoma's Legislature and Supreme Court have chosen to use the word "alimony" in two distinctly different contexts: (1) Concerning support/maintenance of one spouse by the other; and (2) Concerning property division. This discussion concerns the latter usage.
Property division alimony has nothing at all to do with support. It is an award of a money judgment to one spouse against the other which is made for the purpose of accomplishing an equitable property division.
Such an award carries with it various characteristics and effects: The amount awarded is incapable of modification. Neither the payment nor receipt of property division alimony is an income event (i.e., it is neither deductible from the income of the payor nor includable in the income of the recipient). The debt is not affected by the remarriage of the recipient (or, for that matter, of the obligor). It survives the death of both parties; hence, it is collectable by the estate of the recipient and against the estate of the obligor. The obligation of the obligor to pay property division alimony is dischargeable in a bankruptcy of the obligor.
Instead of lump sum deferral, discussed above, payment of the amount required to balance an in-kind property division judgment could be ordered to be made in periodic payments of defined amounts by the spouse who received a disproportionately small in-kind division of the marital estate. For example, a $30,000 property division alimony judgment could be made which required the obligated spouse to make to the other monthly payments of $500/month for 60 consecutive months.
As with lump-sum deferred judgment payment, the trial court could grant or withhold a judgment for interest on the debt; it could secure payment of the judgment by a lien against real property awarded to the obligated spouse; it might include a provision that the full unpaid balance would accelerate (all become immediately due) if periodic payments are not made when they are due.
Retirement Account Division Top of Chapter
With certain exceptions, retirement accounts which are wholly or partially accrued during marriage are part of the marital estate. If such accounts exist, they may require valuation by an actuary or certified public accountant to determine current fair market value. Such accounts or interests include, among others, Oklahoma state employee retirement plans, military retirement, private employer retirement plans such as 401K and other kinds of plans.
And, since spouses' separate property may be the source of or considered in the making of support alimony or child support orders, or may be a factor the court would consider in arriving at the chosen proportionate division of the marital estate, such valuation may be needed even if a retirement account is not part of the marital estate.
Since retirement accounts do not "pay" until specified future times, sometimes an order can be entered which would divide such accounts and/or payments into separate portions between the parties, at or before the time the payments are actually made. Such orders are typically called "Qualified Domestic Relations Orders". Depending upon the retirement plan, the order could also deal with other aspects of the retirement plan, such as beneficiary designation in the event of the death of the retirement plan member. The evaluation and division of a retirement account can involve considerable complexity. The drafting of appropriate orders is not simple and it requires skilled handling by your attorney.
Rights of Creditors Top of Chapter
In entering its orders concerning division of the marital estate, the trial court will order one party or the other to pay the various marital debts. Typically, the spouse which is ordered to pay a particular debt will also be ordered to indemnify (hold harmless) the other spouse from that particular debt and creditor.
However, it is important that you be aware that a creditor's rights are not generally affected by a divorce court's orders. The divorce court may not enter orders which change the legal rights of the creditor. A particular spouse's obligation to a particular creditor is solely determined by that spouse's obligation to that creditor, which is most often a contract to pay money to that creditor. The creditor will not care who pays the debt, but it will want someone to pay it.
If both spouses are legally obligated to the creditor, the creditor will be entitled to make legal claim against them both if payment is not made. For example, if a husband is ordered to pay XYZ Finance Company and to hold his wife harmless from the debt which each party had earlier contracted to pay, if the husband does not pay the debt XYZ Finance Company may pursue collection against either or both spouses.
Should that occur, the ex-wife's legal remedy is not against XYZ Finance Company, it is against her ex-husband. She can request that the divorce court enforce its indemnity order against the husband, most probably through indirect contempt of court proceedings.
Effects of Bankruptcy Top of Chapter
Generally speaking, a divorce court's orders pertaining to property division are affected by a bankruptcy proceeding of either ex-spouse. Hence, if a divorce court order requires a spouse to pay either property division alimony, or requires a spouse to pay a particular creditor as part of the court's order equitably dividing the marital estate, the obligated spouse may discharge such debts (to the ex-spouse and/or third party creditor) in bankruptcy. However, under a 1994 addition to the Bankruptcy Code, it may be possible that the creditor ex-spouse obtain an order avoiding the discharge of divorce property division orders unless "discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor." Such a determination would necessarily occur through a timely adversary proceeding commenced by the creditor spouse in the bankruptcy litigation.
On the other hand, support orders are not generally dischargeable in bankruptcy. If an order to pay a particular creditor was made as part of the support orders of the case (or was intended for that purpose), it may be determined in the bankruptcy proceeding that the debtor's discharge does not apply to such debts. Orders relating to support have been held to include not only the obvious - spousal and/or child support - but also attorney fee awards to the creditor spouse in the divorce litigation, including fees involved in child custody disputes.
In a bankruptcy proceeding and regardless of language contained in the divorce decree, the bankruptcy court makes its independent determination as to whether a particular obligation is in the nature or support or not. Bankruptcy courts do not necessarily apply state law in making such determinations.
Assets awarded to a spouse as property division may be subject to liquidation in that spouse's bankruptcy. Hence, where the ex-husband was awarded a property division judgment against the ex-wife and home, payable in the future, upon the ex-husband's bankruptcy, his judgment and judgment lien may be liquidated (sold) in the bankruptcy action. The ex-wife might be able to purchase her ex-husband's lien from the bankruptcy trustee at an exceptionally good discount.
Although Loudenback's Lay Divorce Guide is not particularly concerned with post-divorce litigation between the parties, failure to consider such matters in the divorce case might turn what appears to be a "good deal" into a very bad nightmare.
Omitted Property Top of Chapter
If an item of property is "left out" of the property division orders in divorce, unless a moving party can successfully attack the decree by reason of fraud of the other party, the item of property is owned by the same person or persons who owned it before the divorce. So, if the husband's retirement plan is not dealt with in the divorce decree, he owns all interest in it. If a piece of real property owned by the parties as joint tenants (all interest in the property passes to the surviving joint tenant upon death of the other joint tenant) was forgotten about during the divorce, the parties continue to own it jointly (but probably as tenants in common - each party owns an undivided half interest property which passes to his/her heirs or devisees upon the owner's death).
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