In many divorce cases, there are mistakes made as to the division of assets when the divorce is resolved. All divorces are resolved by an agreement1 that the court reviews, approves, and orders.2 If there is no agreed-to resolution, the case will be tried and the judge will decide all the pending issues in the case that are not resolved, ranging from child custody and parenting time to child support and division of assets. This blog covers common mistakes made in splitting assets in a divorce.
Marriages, by the very nature of the vows, “till death do us part,” are partnerships that are not meant to be dissolved. With this mindset, most married couples slowly intertwine their assets during the marriage in a way that is hard to later divide. Clearly, skilled divorce counsel can determine how to divide any assets under the many tools in the divorce act. However, in a significant number of cases, parties fail to identify a given financial account or debt for their counsel. If this is not identified and divided by agreement or by a trial court at trial, the court loses jurisdiction over the case and cannot later divide it. Your divorce attorney may not be able to assist because thirty (30) days after the court decided a case, the court loses jurisdiction over property division. This may mean if this is a debt, it stays the debt of the party whose name it is in. If it is an asset, it may remain in possession of the person who has the item, even if it were the other party’s family heirloom. With respect to the contents of the household, some parties ask the court for an equal division without delineating what exactly each party is to receive. Unless you are sure you can agree after the divorce decree issues as to what items will go to each person, a list of items each party is to receive should be a part of a mediated agreement or exhibit at trial. Avoid these mistakes as they have little ability to be addressed by the divorce court after you are divorced.
Failing to properly value assets is another significant problem in many divorce cases — especially if the party wants an equitable division by way of mediation or trial. In Indiana, a divorce court is to presume a just and equal division of the marital estate is a fair division.3 However, it is very easy to take an approach, for instance, that the party keeps the vehicle he or she is driving. If one vehicle is paid off and the other has a loan, taking this position is unlikely to result in an equal division of these two assets in the marital estate. The way to value a vehicle is to take what it is worth,4 minus what is owed on the vehicle, and what is left for each vehicle determines if an offset must be given to make an equal division. So, for example, if one vehicle has market value after subtracting the loan of $10,000 and the other $5,000, the person with the $10,000 vehicle needs to pay the other $2,500 to effectuate an equal division. With a marital home, the value to divide (or negative equity) is determined by an appraisal.5 If a family business is involved, this is determined by a business valuation.6 Failing to have proper property values makes it unlikely an equitable division of the marital estate will occur.
The final area there are significant problems in a significant number of cases is with retirement accounts, such a pension. These must be valued by an economist as of the date of filing.7 There are two (2) typical ways they are valued, the most common being by applying a coverture fraction. This merely accounts for the growth of value in the account during the marriage. However, a party is free to argue for an equal division, but this must be valued this way in the valuation process, or the court will not know what to award. Indiana trial court judges are free to accept either type of valuation depending on the facts in the case and what is just and equitable. Without this valuation, the retirement account cannot be properly divided at trial, likely hurting the spouse who is not the one who had the pension from his or her own work. This is not necessarily the most significant problem in dividing this type of asset in a divorce. Most litigants believe when the divorce decree is entered, it ends the case. Not so. With certain retirement accounts that are divided, a Qualified Domestic Relations Order must be prepared, approved by the plan administrator, and ordered by the court to transfer the money. This is time-consuming and sometimes overlooked at the end of the divorce. It is key to ensure the QDRO is completed, approved, and ordered. With this, the other spouse will receive a tax-free transfer of the account so divided.
All in all, many divorces have mistakes made in splitting assets. At times, such a mistake may not be able to be corrected and cost a party thousands or tens of thousands of dollars. Most divorces with significant assets boil down to a complex financial transaction and require appraisals and valuations to properly divide the marital estate. Thus, it is imperative you have a competent divorce attorney to ensure your financial future is protected and you avoid these (and other) common mistakes made in dividing marital assets. This blog was written by attorneys at Ciyou & Dixon, P.C. who handle large asset divorce cases throughout the state. This blog is intended for general educational purposes. It is not legal advice or a solicitation for services. It is an advertisement.
- Most Indiana divorce courts require the parties to mediate to try to resolve the issues in their cases. Most cases settle in mediation.
- In Indiana, despite the presumptions in divorce law, the parties have a constitutional right to freely contract and reach terms of property division the court could not order. So, mediation provides great flexibility in division of assets. That said, the parties are not afforded the same latitude in custody matters. These must be agreed to consistent with the law and be in the children’s best interest or the court is likely to reject the agreement. For instance, the parties cannot agree to no child support as child support belongs to the child.
- This presumption is codified at Indiana Code section 31-15-7-5. That said, if the situation calls for it, the court can make an unequal division. Many reasons make for a strong argument the court should make an unequal division. Skilled counsel can assist you in making your best argument in court for an unequal division.
- Most parties use Kelly Blue Book to determine values for the vehicles.
- A real estate broker may be able to provide you with a market analysis of what he or she believes your house is worth, typically for free, but a prudent litigant obtains an appraisal with comps from a certified appraiser.
- In most all cases where there is a family business involved, a business valuator will be needed to properly value the business as this is a complex task. Business valuations can be quite expensive depending on the type of business that is owned by the family (this does not encompass stock a family may own in a publicly-traded company, said value being easy to determine by trading price).
- Assets are typically valued as of the date of filing, but a divorce court can divide the assets and use values at any date between the date of filing and the divorce.