Division of Property and Debt: Equitable (Fair) Distribution
If you don’t have anything to divide between you and your spouse, just say so. If you do, you need to tell us how you intend to divide what you have (ASSETS) and what you owe (DEBTS).
Divorce law defines assets and debt as either marital or nonmarital. Here are definitions:
Assets – includes everything owned by you and your spouse, including property, cars, furniture, bank accounts, jewelry, life insurance policies, businesses or retirement plans. An asset may be marital or nonmarital, but that distinction is for the court to determine only if you and your spouse do not agree on a fair split. Don’t forget contingent assets, which are assets you may receive later, such as income, a tax refund or a bonus.
Marital Asset – generally, anything that you and/or your spouse acquired or received (by gift or purchase) during the marriage. For example, something you owned before your marriage may be nonmarital. An asset may only be determined to be marital by agreement of the parties or determination of the judge.
Nonmarital Asset – generally, anything owned separately by you or your spouse. An asset may only be determined to be nonmarital by either agreement of the parties or determination of the judge.
Debt – is everything owed by you or your spouse, including mortgages, credit cards, or car loans. A debt may be marital or nonmarital, but, again, that distinction is for the court to determine only if you and your spouse do not agree on a fair split. Don’t forget contingent debt, which is debt you may owe later, such as payments for lawsuits, unpaid taxes or debts you have agreed to pay if someone else does not, such as a note you co-signed on.
Marital liability (debt) – generally, any debt that you and/or your spouse incurred during the marriage. A debt may only be determined to be nonmarital by agreement of the parties or determination of the judge.
Nonmarital Liability (debt) - generally, any debt that you or your spouse incurred before your marriage or since your separation. A debt may only be determined to be nonmarital by either agreement of the parties or determination of the judge assigned to your case. Judges DO NOT want to take control of your personal affairs but will IF you can reach an agreement.
How to Divide Property and Debt in a MA Divorce Case
Massachusetts is an equitable distribution state. Most of the time it means equal but there are circumstances that may make the distribution less than equal. The issue for the divorce judge assigned to your case (assuming you do not resolve issues with your spouse) is what is fair under all circumstances.
If one spouse gambled away marital assets, the judge may take that into account when dividing up your property and debt.
The Marital Home in a Mass. Divorce: Who Stays? Who Goes?
- The home is sold and the proceeds are divided;
- The home is to be sold at some future date and the proceeds are divided at that time. If the marital settlement agreement allows one spouse to remain in the home for some time before it is sold; or
- One spouse buys out the other’s interest in the home.
Consider tax implications of divorce when selling the home
Make sure you have every tax advantage in keeping the house, the right to itemize deductions and deduct the mortgage interest and property taxes. That is another benefit of owning real estate.
Dividing Retirement Accounts in Mass. Divorce
What type of accounts do you and your spouse have?
Defined Contribution Plans are plans in which the person has his or her own account and there is a sum-certain value in an investment account. The balance of the account builds as money is added to the account and as the investment grows, it generates interest or dividends. These types of plans include 401(k) plans, profit-sharing plans, stock bonus plans, employee stock ownership plans (ESOP), and Individual Retirement Accounts (IRA).
Defined Benefit Plans are plans in which an employer promises to pay an employee a particular benefit when the employee reaches retirement age. Employers make contributions to the plan, and the contributions sometimes can be increased by the employee. The marital portion of the plan is the portion of the plan that was accumulated and earned during the period of the marriage.
How to divide retirement accounts when you divorce
- Offset against other marital assets;
- Division of the Plans. A QDRO (Qualified Domestic Relations Order) is required. This document, once approved by the court, instructs the plan administrator on how to divide the asset. This is a very technical document which we do not prepare. Usually the parties agree to split the cost to have it prepared (usually about $500.00);
- Deferred Distribution until retirement.