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Property Division: Equitable Distribution of Marital Assets and Debts

Property Division in a Divorce: What You Need to Know

Property division is often a challenging process for the the Family Court. Depending on the circumstances of your divorce case, you could potentially gain or lose a significant amount of real estate, property, and assets.  In South Carolina, the Family Court has the authority to divide “marital” assets as part of any divorce or separate maintenance action. Courts use the “equitable distribution” principle to apportion the property according to what would be fair by considering several factors.  It is essential that you involve a Divorce Attorney from the very beginning to fully protect your interests.

 The Family Court typically follows a four-step process for property division in separation and divorce cases.

  • Identify the marital property, real and personal property, and debts to be divided between the parties;
  • Determine the fair market value of assets and amounts owed for the identified debts;
  • Identify the proportional contributions, both direct and indirect, of each spouse; and
  • Provide for the equitable division of the marital estate.

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Direct and Indirect Contributions

The Court considers both direct and indirect contributions by each spouse regarding the accumulation of the marital estate.  Direct contributions are the earnings by each spouse that provided the funds used to purchase the assets that consist of the marital estate. Indirect contributions include things done by a spouse that do not result in money, but enable the other spouse to earn money.

Identification as Marital vs. Non-Marital Property

The court will consider several factors to determine whether the business interest being considered is separate or marital. Marital property is all real and personal property acquired by the couple during the marriage. It includes everything owned as of the date of the filing of the marital litigation. If a business interest was acquired during the marriage and with joint funds, it is considered marital property. The court has the authority to apportion marital property.  As a result, the value will be shared by the parties equally.

The South Carolina Court of Appeals explained that “Marital Property” in Panhorst v. Panhorst.

The marital estate must be identified as of a fixed date.  Given the vicissitudes of life, the parties’ fortunes will change over the years of a marriage.  Often the marital estate may have enjoyed a greater value in the past than it does at the dissolution of the marriage.  It may be affected by changes in the incomes and earning capacities of the spouses, their spending habits, their savings and investments, and a host of other factors.  By requiring the estate to be identified as of the date marital litigation is filed, the Legislature has elected to foreclose the spouses from litigating every expenditure or transfer of property during the marriage.

301 S.C. 100, 390 S.E.2d 376, 379 (Ct.App. 1990).  On the other hand, the court does not have jurisdiction or authority to apportion non-marital property. Non-marital property includes:

  1. Property acquired by either party by inheritance, devise, bequest, or gift from a party other than the spouse;
  2. Property acquired by either party before the marriage;
  3. Property acquired after the happening of the earliest of:
    • Entry of a Temporary Order in a Divorce or Separate Maintenance Action;
    • Formal signing of a written property or marital settlement agreement;
    • Entry of permanent Decree of Separate Maintenance or of a Final Order approving a property or marital settlement agreement between the parties;
  4. Property acquired by either party in exchange for property described in items 1 and 2 above;
  5. Property excluded by written contract of the parties (prenuptial agreement);
  6. Any increase in value in non-marital party, except to the extent that the increase resulted directly or indirectly from efforts of the other spouse during marriage.

It does not matter how the assets are titled, whether they are in the husband’s name, wife’s name, or jointly in both names. If the assets are titled in a third-party’s name, or were transferred to a third party as a result of the litigation, that third party may be added as a party to the separation or divorce action so the court can equitably divide the assets.

Valuation of Assets For Your Property Division

Once the marital estate is identified, it is defined and valued as of the date the separation or divorce action is filed. Each asset is valued at its current fair market value, not its purchase price or replacement cost.  There are some exceptions for assets that have passive increases or decreases in value. As a result, those business assets may be valued as of the date of the final hearing.

Dividing the Marital Estate

Generally the marital estate is divided equally between the parties. However, the Family Court can allocate more than 50% of the marital estate to one party under certain circumstances. South Carolina Code Ann. § 20-3-620 provides a list of factors the Family Court will evaluate when apportioning the marital estate:

  1. the duration of the marriage together with the ages of the parties at the time of the marriage and at the time of the divorce or separate maintenance or other marital action between the parties;
  2. marital misconduct or fault of either or both parties;
    • The Family Court will consider how the misconduct has affected the economic circumstances of the parties, or contributed to the breakup of the marriage, and whether it was used as a basis for the divorce action.
  3. the value of the marital property;
    • The Court will look at the “contribution of each spouse to the acquisition, preservation, depreciation, or appreciation in value of the marital property, including the contribution of the spouse as homemaker; provided, that the court shall consider the quality of the contribution as well as its factual existence;”
  4. the income of each spouse, the earning potential of each spouse, and the opportunity for future acquisition of capital assets;
  5. the health, both physical and emotional, of each spouse;
  6. the need of each spouse or either spouse for additional training or education in order to achieve that spouses’s income potential;
  7. the nonmarital property of each spouse;
  8. the existence or nonexistence of vested retirement benefits for each or either spouse;
  9. whether separate maintenance or alimony has been awarded;
  10. the desirability of awarding the family home as part of equitable distribution or the right to live therein for reasonable periods to the spouse having custody of any children;
  11. the tax consequences to each or either party as a result of any particular form of equitable apportionment;
  12. the existence and extent of any support obligations, from a prior marriage or for any other reason or reasons, of either party;
  13. liens and any other encumbrances upon the marital property,
    • The Family Court will look at any liens that must be equitably divided, or upon the separate property of either of the parties, and any other existing debts incurred by the parties or either of them during the course of the marriage;
  14. child custody arrangements and obligations at the time of the entry of the order; and
  15. such other relevant factors as the trial court shall expressly enumerate in its order.

Property Division: Call the Strom Law Firm, LLC Today

Our South Carolina Divorce Attorneys have experience dealing with complicated property and business valuations and can help you understand your financial future going forward.  Depending upon the financial value of the business, you may need to hire a forensic accountant or CPA to help you determine the actual value of the interest at stake. Having a South Carolina Tax Attorney who understands accounting, as well as any corresponding tax implications, can ensure that you are prepared and fully understand the financial consequences beyond the final divorce proceeding. Give us a call today to schedule a consultation.

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