Asset Division
Property division in Michigan follows the rule of equitable distribution. While there is no requirement that property awards to each party be precisely equal, there is a presumption that the division will be about the same.
Courts most frequently depart from the 50-50 model of property division in short-term childless marriages that have had few economic consequences to the parties; in cases in which there is significant separate property; or in cases where one party has greater need.
Before dividing property, courts and lawyers face the task of identifying what is to be divided. In the past, parties argued over whether marital property included premarital assets acquired during periods of cohabitation or property received after separation of filing the divorce. For purposes of identifying what is marital, the marriage begins with the wedding and continues until a judgment of divorce, irrespective of when the parties cohabitated or separated.
Because the value of parties’ property may fluctuate over time as assets are consumed, accumulated, appreciated, depreciated or even hidden, courts have the discretion to value the martial estate at the time of separation, filing, trial, judgment or some other date.
After the time for valuation, lawyers must be able to assess the value of the parties’ assets. This is necessary to help the client evaluate what is fair in a negotiated settlement or to prove the value in court if the case becomes contested.
Before dividing property, you and your attorney must first identify the property that is subject to division. This exercise raises may challenges to courts and counsel. New types of financial products and employment benefits are constantly evolving, stretching the limits of traditional definitions of property.
One of the first decisions to be made is if the marital home should be sold. To determine whether or not to sell, first ask yourself if you really want the house – memories and all. If you do, can you afford to make payments and pay for the costs of repairs and maintenance based on your salary alone? To decide if it makes good financial sense to sell, you should find out how much the house is worth and how much equity you have.
When one spouse keeps the house, this may include buying out the other’s share, either with equivalent marital property or in payments over time. If you go this route, you should determine how much each spouse’s interest is worth. You may or may not necessarily want to split your interest 50/50, depending on your circumstances. For example, if separate funds were used to purchase or improve the value of the home, the spouse who contributed the funds may be entitled to a higher share. If the house was purchased before marriage, and you’ve only been married a few years, you may want to take this into consideration.
Another alternative is if one spouse is granted exclusive use for a specified period of time, after which the house will be sold. This might be done if one spouse wanted to stay in the home, especially if that spouse had custody of the children, and there weren’t enough marital assets for one spouse to buy the other’s interest out. Or maybe selling the house right now is not in your best interest, for whatever reason.
This is also probably the most difficult arrangement, requiring the most amount of cooperation. Of course there are pros and cons to every option. If you do this, you’ll essentially be joint owners for a period of time. The spouse who isn’t living in the home still has an interest in the property, so he or she will most likely be concerned about how the other spouse is keeping up the property, and this is a potential source for future conflict.
Retirement plans could possibly be the most valuable asset someone owns. Your retirement portfolio, in addition to the typical 401(k), pension, profit-sharing, or IRA, might also include other employment benefits such as bonuses, vacation days, and stock options. The portion of your retirement plan that’s considered “marital property” might be subject to division. What your state considers as marital property, and how it divides marital property, will be determined by each state differently. Michigan, like virtually every other state, holds the view that property derived from the earnings or efforts of spouses during the marriage is marital property divisible on divorce.
In addition, a closely held business is often not only a valuable asset but also the primary source of income for one or both spouses. This creates a problem regarding what role a business should play in reaching a property settlement. When a business’s main value is in its tangible assets, it makes sense to treat the business simply as an item of property. But when the main value of the business is goodwill, awarding half of the present value amounts to an award of a property interest in the business owner’s post divorce earnings. To value the business, you’ll need to get an appraisal. When determining the business’s worth, an appraiser might take into account the reputation of the business; how much that reputation is dependent upon each spouse’s contributions to the business; the value of the equipment, land, and building; the accounts receivable; if there are partners or other owners involved; and many other issues.
Usually household items aren’t worth a legal battle, but there are many methods you can use for dividing them up. Walk through the house, either together or separate, and make an inventory of all the items. You should make a list of all the items you want to keep, and all the items you don’t mind your spouse getting. Some things will probably be more important to you than others. Think of how easy each item will be to sell and what it might be worth. If there is anything that neither person wants, you could sell it and split the proceeds.
For a confidential consultation regarding dividing your marital assets, call 248-541-2600 and speak to Attorney Barton W. Morris, Jr.
