Property Division

Background

1. Massachusetts is an equitable distribution state. This means that whatever has been acquired or earned during the marriage is subject to being divided in the divorce. In addition however, a judge hearing the divorce has the discretion to considers assets accrued before the marriage and has the discretion to consider assets which might accrue in the future in fashioning a division of property.
2. Division of property in Massachusetts is governed by General Laws chapter 208 section 34. This statute sets forth various factors which a judge would consider in deciding how to divide the parties' assets and liabilities. There is not one factor which is controlling. Each case has unique circumstances and some factors may be much more important in some cases and not at all important in others.
3. The Section 34 factors are:
   • Length of the marriage
   • Conduct of the parties during the marriage
   • Age of the parties
   • Health of the parties
   • Station in life of the parties
   • Occupation of each party
   • Amount and sources of income of each party
   • Employability of each party
   • Vocational skills
   • Estate
   • Liabilities
   • Needs of each party
   • Opportunity for each party's future acquisition of assets
   • Opportunity for Each party's future acquisition of income
   • Contribution to the marital estate
   • Present and future needs of the children
4. When a divorce is filed there is a requirement pursuant to Supplemental Rule 410 that the parties exchange certain financial documents which each other. If the parties want to obtain additional information, they can do so through the "discovery process." This includes sending out Interrogatories (written questions that must be answered under the pains and penalties of perjury) or Requests for Production of Documents. The parties can also schedule a deposition of all witnesses (including the other spouse) who they think might have relevant information to the divorce. During a deposition, the lawyer is able to ask the deponent (the person who is subpoenaed to appear at the deposition) questions pertaining to the court action while the deponent with a stenographer present and while the deponent is under oath. A transcript of the deposition may be ordered after the deposition.

   One of the main reasons for conducting discovery is to obtain as much information as possible about the finances. Particularly if one spouse is less knowledgeable about the finances, it is important for that spouse to obtain as much information as possible so that he or she can make a reasoned and informed decision about the property.

5. Whether an asset is held in individual or joint names is not particularly relevant in deciding how to divide assets. Assets are considered marital property whether held individually or jointly.
6. In a divorce action filed with the court, the parties must fully disclose all of their assets and liabilities. When a divorce is litigated, this is done through discovery.

   In mediation and collaborative law, this information is gathered and produced voluntarily.

Assets

Some of the more common assets to be considered in a divorce are:

Real estate:

By far the most common and often thorniest asset to divide is the parties' marital home. The simplest way to "divide" this asset is to sell it and share the proceeds. However, typically, one party will want to stay in the home. If that is what is decided, the parties will need to reach an agreed value for the house. This is usually accomplished by obtaining an appraisal, or by the parties negotiating an agreed upon value for the home. If they choose to have the house appraised, they can either each obtain their own appraisal or they can agree to retain an appraiser together and use the value of the "joint appraisal."

Some other issues to consider with respect to the marital residence are:

• Will the spouse staying in the home be able to buy out the other spouse completely?
• Will the spouse staying in the home refinance to take the other spouse off of the mortgage?
• Should the calculation of the "net equity"of the home include an assumption that the person retaining the house will have to pay a real estate commission when he or she sells the property?
• If a realtor's commission is factored in, at what percent should the commission be calculated?
• Will the remaining spouse pay the other spouse the full equity now or will some or all of the amount be owed at some later time?
• If so, will there be a promissory note associated with the amount owed in the future and will there be interest attached to the note?
• Will the parties continue to own the home together?
• If so, and one of the parties is out of the house, how will they handle repairs?
• Will there be any tax consequences to the spouse who is no longer in the home?

Retirement Accounts:

In Massachusetts, retirement assets, even though they are in one person's individual name, are considered marital assets. There are various types of retirement assets. Some are more easily divisible than others. Defined Contribution plans (401K plans for example) are similar to savings accounts and can be easily valued. Each account has a daily balance just as a savings account does. Defined Benefit Plans are set up to pay the participant a particular amount per month at a certain age. It is possible to obtain a present value for the defined benefit plan. A present value is another way of saying the following: If husband were to purchase an annuity that would pay him $xxxx per month at retirement, how much would that annuity cost him?

Retirement plans can be divided through a Qualified Domestic Relations Order (QDRO). This is an order, prepared by the parties' lawyers or an actuary and signed by the judge, which is sent to the administrator of the pension for implementation. QDROs are very technical and must meet many technical requirements to be valid and effective. In dividing pensions, the parties are dividing up a very important future benefit. Great care should be taken to insure that the QDRO is done properly and that when sent to the administrator of the pension, there is follow up to make sure the division has occurred.

Some issues to consider with respect to pensions are:

• Should the pension be valued as of today and its present value divided now or should the pension be divided as of a future date? There are different methods of obtaining a present value, which method is the appropriate one?
• What are the tax implications of receiving a pension?
• Does the pension have a post retirement joint survivor annuity? Does the pension have a pre-retirement survivor annuity?
• Is there any portion of the pension that was accumulated prior to the marriage?

If so, should the non-participant spouse receive a share of the pre-marriage or post-separation pension?

Personal property:

Most people are usually able to divide up their personal possessions such as furniture, dishes, appliances etc between themselves. Sometimes if they cannot or there are items which are valuable, they may want to have the property appraised.

Vehicles:

Values can be obtained using the Kelly Blue Book www.kbb.com.

Some issues to consider with respect to vehicles are:

• If there is more than one vehicle, are they comparable in value?
• Is there a loan on a vehicle and if so, is it in one or both parties' names?

Businesses:

If a business is owned by one or both parties, a determination must be made whether the business needs to be valued. Valuing a business could be an expensive proposition. On the other hand, the business is a marital asset and could be very valuable.

Inheritance:

Inheritances and money received from family during the marriage are tricky and often can lead to contentious emotional issues.

Some issues to consider with respect to inheritances are:

• Length of marriage
• Whether the future gift from family is revocable or irrevocable
• Did inheritance from family come in during marriage?
• Were the proceeds segregated or intermingled with other family assets?
• What is each party's potential for inheritance after the marriage and should that be a factor?
• What if parties were counting on inheritance for college?

Liabilities

In Massachusetts, liabilities (debt) are generally treated exactly the same as assets in determining how they will be divided between the parties. It is essential to develop a comprehensive list of all debt. It is especially important that both parties understand that any agreement they make with respect to debt does not prevent a creditor from seeking to collect on the debt from either responsible party.

Some issues to consider with respect to liabilities are:

• In whose name is the debt?
• Who benefited from the goods or services that resulted in the debt?
• If jointly responsible, how will the debt be divided?
• Will the non-responsible party's name be removed from the debt, or will that party be somehow indemnified?
• When was the debt incurred - prior to or during the marriage, or after separation?

Some of the more common liabilities to be considered in divorce are:

Credit cards:

Are they individual or joint? If joint, can they be transferred to one party? Were debts incurred for marital purposes?

Mortgages:

(See Real Estate section above under Assets)

Auto loans:

(See Vehicle section above under Assets)

Personal Loans:

Are they individual or joint? If joint, can they be transferred to one party? Were debts incurred for marital purposes?

Loans From Family Members:

Whose family made the loan? Was the loan made to a specified family member, or to the couple? Is there an expectation of re-payment, or of forgiveness?

Medical & Dental:

Who received the services? When?

Utilities:

What types? When? For what purpose?

Taxes:

What type (personal, property, etc.)? Current or arrears?

Education:

For whom? When incurred? For what purpose?