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The division of marital property and debts is referred to as equitable distribution, often as “ED” for shorthand reference. There are more aspects to property division than just dividing marital property and debt, which will be discussed in more detail below. Note that you may settle your property and debt issues via private agreement when possible, but when this is not an option the court can decide for you. In order to make this determination, the court will resolve the claim in four steps:
- Identification. The Judge will identify all the assets and debt as of your date of separation (defined as the date you and your spouse stopped living together under one roof) and will determine what property has been acquired from the date of separation through the date of trial (this is referred to as divisible property).
- Classification. The judge will classify each item of property as marital, separate or divisible property. The judge will classify each debt as either marital, separate or divisible debt. Your attorney will explain to you what these terms mean and why it is important to your case. Note that the court has no power to distribute separate property or separate debt to someone other than the owner of the asset or debt. Only marital and divisible property/debt may be distributed by the court as part of a claim for equitable distribution.
- Valuation. The judge will determine the net value of the assets and determine the amount of the debt.
- Net value is the fair market value of the asset less the amount of any debts which are liens upon it (such as a mortgage associated with real property for example; a lien is a debt secured by the property).
- Fair Market Value is the price which a willing buyer would pay to a willing seller under circumstances where they are acting voluntarily and not as a result of any pressures. This is NOT the same as replacement cost. For example, the fair market value of the coffee table in your den would be what you could sell it for on Craig’s List or EBay on the date of separation, not what it would cost to go to a furniture store and purchase another similar coffee table.
- Note that while the fair market value of some of these assets can be fairly easy to determine, in some situations such as valuing real estate, high end personal property (like antiques or art work), retirement accounts or business interests, it is necessary to hire an appraiser who may testify in court if necessary as to the value of these type of assets.
- Distribution. The fourth step is the actual distribution of assets and debt. There is a presumption that each party receiving an equal share of the net marital estate is equitable. The marital estate is based on the total value of the assets and debts. For example, one person may get one large asset and more of the debt and the other person may get smaller assets and less debt but the net value of each is the same. The judge may feel it is equitable to award one person more of the marital estate than the customary 50% based on certain factors in the equitable distribution statute that your attorney can discuss with you in greater detail.
Many folks inquire as to whether fault can affect the division of the marital estate, such as when one person engages in adultery. Equitable Distribution involves only financial considerations; meaning that one spouse having an affair would not necessarily affect the property division. However, FINANCIAL Fault is relevant; such that if the cheating spouse bought the paramour a car with marital funds it would be a relevant consideration in equitable distribution due to its financial nature.
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