Classification, valuation, distribution, and debt

Black-letter propositions

1. 01

   Marital property generally includes earnings and acquisitions during marriage; separate property commonly includes premarital assets, gifts, inheritances, and validly excluded property.

2. 02

   Commingling and transmutation can change classification; tracing can preserve a separate component.

3. 03

   Appreciation may be active and marital or passive and separate depending on law and contributions.

4. 04

   Equitable distribution is fair, not necessarily equal, and considers statutory economic and sometimes misconduct factors.

5. 05

   Pensions, businesses, stock compensation, professional practices, tax effects, and hidden assets require valuation and implementation.

6. 06

   Marital debt classification depends on purpose, timing, and benefit.

Use this attack sequence under time

Common wrong turns

• Title alone does not determine marital classification.
• A degree itself is usually not property, though reimbursement or support may address contributions.
• Property division is ordinarily final and not modifiable like support.

Worked example

A spouse uses inherited funds for a home titled jointly and cannot trace the contribution.

Practice this topic

Marital and separate property

Cornell says marital property is all property acquired by spouses during the marriage regardless of whose name is on the title. In most states, appreciation of premarital property due to the efforts of one or both spouses is also marital, while passive appreciation stays separate. Separate property is what a spouse acquired before the marriage, and in New York's statute it also includes property acquired by bequest, devise, descent or gift during the marriage.

Cornell's entry says professional degrees or licenses are generally separate property, but most states require reimbursement for support that funded the education. A minority treat a degree as marital property and divide its value using estimated future earnings.

Community property and equitable distribution

Cornell lists Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin as community property states, and says Alaska lets spouses choose. Community property is allocated equally after the court decides what is community property. Cornell says the equitable distribution approach used by the majority of states divides marital property fairly, which may not be equal.

Its list of common factors includes each spouse's contribution, liabilities, duration of the marriage, age and health, earning capacity, the value of separate property and retirement rights, custody and child support, homemaker and parent contributions, and tax consequences.

Fault, misconduct and debt

Cornell says marital fault such as adultery is generally irrelevant to allocation, although economic misconduct such as dissipation of assets is considered. Some states, such as South Carolina, treat marital misconduct as relevant if it contributed to the dissolution or affected the parties' economic circumstances.

The community property entry says community property can include debt as well as assets and income. NCBE's outline lists division of debts, transmutation of property, and the possibility that agreements will control, so classify each item and then apply the state's distribution rule.

Frequently asked questions