Property Division

What’s the difference between marital and non-marital property?

  • In a divorce in the aspect the category

    of division of property the very first

    step is to determine what is marital

    property and what is separate property

    to paint with a broad brush there are

    essentially three kinds of separate

    property any property you owned prior to

    the marriage if you have kept it

    separate any property you’ve inherited

    during the marriage if you’ve kept it

    separate

    and any gifts that you have received

    during the marriage if you’ve kept them

    separate once you call out what you

    think is the separate property owned by

    each spouse whatever is left is your

    marital estate and that is what is

    subject to division in a divorce process

    separate property is not subject to

    division now if you notice all three of

    those categories had the caveat if

    you’ve kept it separate you can turn

    separate property into marital property

    essentially by two processes either by

    commingling it with marital property or

    treating it in such a way that it has

    gradually been transmuted from separate

    property into marital property if you

    had $50,000 in a savings account when

    you got married but during the course of

    the marriage you have put it into a

    joint savings account uh with your

    spouse and there’s now $100,000 in that

    bank account it’s commingled it has lost

    its identity of separate property

    because if you took hundreds and

    hundreds of dollar bills and put them

    out on a table you couldn’t tell which

    $100 bill was the one you owned prior to

    the marriage which one you earned during

    the marriage that kind of thing

How is marital property divided in a divorce?

  • Tennessee is not a

    5050 uh state which would some people

    call a community property State

    Tennessee is based on what is Equitable

    under the circumstances of the case as I

    said earlier there are a lot of

    variables in each of these

    categories Tennessee does start

    out from the standpoint I have found

    that virtually all our judges do this

    they start out looking at both parties

    and again as if we’re in court uh the

    judge’s attitude is usually okay I

    believe that a 5050 division would be an

    equitable Division and Tennessee is an

    equitable division state if one party

    thinks they should get more than 5050

    the burden is on them to convince the

    court that more than 5050 is Equitable

    now I’ll give you some examples let’s

    say you have a long marriage let’s just

    say that uh one spouse is a CEO of a

    very successful company and has a very

    nice six or seven figure income is in

    good health the other spouse uh does not

    have good employment skills maybe has

    been in the home for a number of years

    perhaps has a a debilitating illness

    like rheumatoid arthritis I’ve seen that

    before that spouse is not going to go

    out and make the same kind of money as

    the successful healthy

    spouse so perhaps a bigger share of the

    marital estate is called for and would

    be Equitable and that is that happens

    quite a bit you can see divisions that

    may be 55 45 you can even see 6040 once

    you get past 6040 you’re kind of pushing

    the envelope but but it’s possible

How does the division of complex assets impact taxes in a divorce?

  • When I’m helping a client divide a

    complex estate and by that I mean a

    state with lots of assets or an estate

    with lots of different types of assets

    you have to take into account the tax

    implications on the different assets one

    of the simplest examples I can give is a

    401k or IRA when a person is going to

    start taking withdrawals from a 401 K or

    IRA they are going to be taxed on those

    withdrawals Okay Age 72 whenever they

    start drawing those out if a person owns

    a home it’s different because it’s not

    going to be taxed it’s a value in the

    house so what you want to see when

    you’re dividing things up you’re not

    really dividing apples and oranges if

    someone gets a $500,000 house and

    someone gets a $500,000 401K the

    $500,000 401K is going to eventually

    realize taxes you know at the time when

    the the money is being drawn out the

    house is a different story so you’re not

    really dividing the same type of

    property those things have to be looked

    at with each and every asset that a

    client has and at the time that they’re

    marital assets we put this all into a

    balance sheet we uh try to distill down

    what the liabilities are for each asset

    and in the case of a retirement plan I

    always add uh at least a 20% uh penalty

    for taxes at the time that would be

    withdrawn and that way we’re comparing

    things a little more fairly so I think

    it’s important when you are trying to

    divide complex assets that you have an

    attorney who understands what the

    implications of those assets are over

    time if you they’re awarded to you

How does divorce impact a closely held business?

  • When you or your spouse owns let’s say

    it’s a family-owned business or a

    business with several other partners

    that business has a value and it’s got

    to get valued you may have already had

    it valued recently or your spouse may

    have been uh thinking about selling it

    and has had somebody come in and make an

    offer you can get value from different

    areas and different information but

    typically what’s going to happen to

    happen is we hire a forensic accountant

    who will come in and look at the pnls

    look at all the accounts receivable look

    at all aspects of the business sometimes

    the forensic accountant has to be

    specific to the type of business if it’s

    construction or if it’s a restaurant

    then they’ve got to be able to put a

    value on that because we’re not going to

    break up the business the business is

    hopefully an income producing entity for

    the marriage and for the post-marriage

    situation of both the parties so the

    business is going to stay as as one

    entity but the value on that business

    has to be split up between the parties

    if that business has been started during

    the marriage and continued to grow

    during the marriage

What are the biggest challenges you face in high net-worth cases?

  • The two biggest challenges I see in high

    net worth divorce cases are one valuing

    all the assets you’ve just got to have a

    really good valuation of everything and

    high net worth divorces tend to be

    complex a lot of time there are trusts a

    lot of time there are um closely held

    businesses family businesses or a

    business that’s been started during the

    marriage that’s grown and grown and

    grown and it’s got to be valued at some

    point so valuation is very important the

    other problem we tend to have in a high

    Network divorce is is one spouse

    determining what is their actual need

    because if there’s a a higher earning

    spouse and then perhaps a spouse who’s

    who’s economically disadvantaged that

    spouse tends to have had a lifestyle

    funded by the higher earning spouse that

    they don’t really know what do they need

    what do they spend a month they aren’t

    like regular people who you know know

    how to pay the Kroger bill and the light

    bill and the utilities and the mortgage

    these are people who have two or three

    homes maybe a plane and they’re used to

    just hopping on first class they don’t

    know what it costs them to live one

    thing if somebody’s got a business

    manager it’s very very helpful the

    business managers tend to have a really

    good handle on on what the actual

    expenses are but coming up with

    lifestyle expenses for the lower earning

    spouse in a high- net worth divorce is

    always a challenge