Equitable Distribution of Marital Property in Washington DC
Specifically, marital property is defined as: (a) real property held as tenants by the entirety, unless excluded by valid agreement. (b) any property acquired by one or both parties during marriage, and does not include any property (1) acquired before the marriage, (2) acquired by inheritance or gift from a third party, (3) excluded by valid agreement or (4) directly traceable to any of these sources. Generally, any asset that has been acquired during the course of the marriage is considered “marital property” (except gifts, inheritance and assets excluded by agreement). This can include houses, cars, pension, 401(k) plans, military pensions, Thrift Saving Plan (TSP), and any savings built up during the course of the marriage.
What are the property distribution laws in Washington DC?
The District of Columbia is an equitable distribution jurisdiction. It uses the dual classification model, and the appreciation of separate property is separate. Equitable does not mean equal, or even half, but rather what the Superior Court considers to be fair and reasonable.
If there is no valid property distribution agreement, each spouse retains his or her separate property, which are assets acquired before the marriage, or gifts or inheritance during the marriage.
The conduct of the spouses during the marriage is not a factor for consideration when the court fashions a property award.
What are the factors of Equitable Distribution?
All marital property, regardless of how title is held, shall be divided equitably and reasonably, based on relevant factors which include:
- the contribution of each spouse to the acquisition of the marital property, including the contribution of each spouse as homemaker;
- the length of the marriage;
- the occupation of the spouses;
- the vocational skills of the spouses;
- the employability of the spouses;
- the estate, liabilities, and needs of each spouse and the opportunity of each for further acquisition of capital assets and income;
- the assets and debts of the spouses;
- any prior marriage of each spouse;
- whether the property award is instead of or in addition to alimony;
- any custodial provisions for the children;
- the age and health of the spouses; and
- the amount and sources of income of the spouses.
Marital property vs. separate property – what is the difference?
The spouse who owns separate (and not commingling property) retains separate property at the time of divorce. Separate property includes assets owned before marriage if kept entirely separate and not commingled or mixed with marital property, income and appreciation of separate property, or property inherited during the marriage.
Attempting to prove individual ownership of separate property in a divorce may require information such as the date of purchase or acquisition, an estimate of value, and account numbers and serial numbers.
How is property defined?
Property includes assets and debts as well as retirement benefits, pensions, stock options, and insurance benefits.
How do you value and divide marital property?
Depending upon the asset and the agreement of the spouses, different methods of valuation may be used to determine the value of a marital asset. When the spouses agree, courts generally accept what they say about the value of an asset. Absent agreement, experts may be retained by the parties or by the courts to determine the value of marital assets. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.
When dividing property in divorce, the first step is to determine what property is considered marital. Since District of Columbia is an equitable distribution state, all marital property is divided equitably unless agreed to otherwise by the divorcing spouses. If the parties don’t agree what is equitable, then a judge will determine what is equitable.
What will happen to the marital home?
In the District of Columbia, as in many jurisdictions, the equity in the marital home is often one of the largest asset the spouses divide. The equity is the fair market value of the house, less any debts or liens against it. Equity is established by determining what the current fair market value of the home is at the time of separation. Once the spouses agree to a current market value, any debts associated with the property (mortgage, taxes, home equity loans, etc.) are deducted from the market value to arrive at the equity to be divided. Often, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.
From there, couples select one of three options to divide the equity:
- The spouses sell the home and divide the proceeds.
- One of the parties may refinance the home and “buy out” the other party.
- One spouse (usually the custodial parent) remains in the home with the exclusive use and possession for a certain period of time (for example, until the youngest child graduates from high school), then either buys out the other spouse or sells the home and divides the proceeds.
- If the couple cannot decide what to do with the house, the court will generally order the house sold.
What will happen to pensions and retirement accounts during divorce?
In the District of Columbia, vested pensions are marital property. A pension vests when all the requirements to receive the pension have been met. Unvested pensions are also marital property. Until the pension has vested, the person under whom the pension is maintained has only an expectancy interest in the pension.
Several different methods of valuation are used in determining how much a marital asset is worth, depending upon the asset to be valued and the level of agreement between the parties. Courts generally accept the value when the spouses mutually agree on a value of a particular asset. Experts may be retained by the parties or by the courts to determine the value of marital assets if the parties cannot agree. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.
In the District of Columbia, the court may include the retirement benefits and plans earned by both spouses as marital assets available for division. Retirement benefits vary greatly but can generally be divided into two groups:
- Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)’s, 403(b)’s and profit sharing plans fall into this category.
- Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employee’s salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.
In the District of Columbia, if spouses share in each other’s retirement or pension plan, a Qualified Domestic Relations Order (“QDRO”)must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution – how much of the benefits are to be paid to each party, when such benefits can be paid, and how such benefits should be paid.
There are many ways to resolve how a spouse will receive which assets. I can help you choose from a wide selection of dispute resolution methods ranging from litigation to an informal handshake agreements to resolve the division of marital property.
To schedule an appointment with me, please call 240-617-0404.