Equitable Distribution in Virginia
Virginia is an equitable distribution state, meaning that the court has the authority in any divorce to classify the property of the parties as separate, marital or hybrid, to distribute any jointly owned marital property between the parties, and to grant a monetary award to either party to ensure an “equitable distribution” of marital property and debts.
Under Virginia Code § 20-107.3, the court in a Virginia divorce must consider all property of the parties whether real or personal, tangible or intangible, and determine which is separate property, which is marital property, and which is part separate and part marital property. The court then decides how to allocate the marital property between the parties, applying each of the factors listed in subsection (E) of § 20-107.3. Those factors include, among others: (a) the contributions, monetary and nonmonetary, of each party to the well-being of the family and (b) the contributions, monetary and nonmonetary, of each party in the acquisition and care and maintenance of the marital property of the parties. Applying each of the factors listed in § 20-107.3(E), the court arrives at its “equitable distribution award.” In the vast majority of cases, the court applies these factors and decides upon a 50/50 split of the parties’ marital property, although the court may also decide upon a different distribution (60/40, 55/45, etc.).
Whatever exact division it decides upon, the court may achieve that split by ordering the transfer of real or personal property between the parties, ordering the sale of marital property (with the proceeds distributed between the parties), and/or granting a monetary award from one party to the other.
Importantly, the only property that is subject to equitable distribution is property that is marital and any portion that is part marital. Each party keeps their own separate property and debts.
Generally speaking, the following kinds of property will be classified as separate in Virginia:
- Property acquired before the marriage;
- Property acquired after separation;
- Inherited property or property received as a gift from someone other than your spouse;
- Property purchased during the marriage using money from the sale of separate property;
- Property acquired during the marriage from the exchange of separate property;
- Income received from separate property; and
- Capital gains, or increases in the value of separate property.
There are exceptions to this list. For example, property obtained with marital funds is usually considered marital, even if it is acquired after separation. Therefore, for example, a spouse who opens up a new bank account post-separation, using marital funds, should not expect to keep that account free from equitable distribution.
Property purchased during the marriage from the sale or exchange of separate property will be classified as separate property, but only if it is kept separate. Such property can be “transmuted” to marital property if it is “commingled” with marital property. This effectively imposes a segregation requirement, meaning that to ensure your property will be kept separate upon divorce, you should be careful to not mix it with marital property during the marriage.
Once separate property is commingled, then you will have the burden of proof to show that some portion of the commingled property is directly traceable to the separate property. You must also show that the property was not intended to be given to your spouse as a gift. Even then, you are out of luck if the court cannot determine the exact portion of such commingled property that is separate.
Income received from, or any capital gains on, separate property may be classified as marital to the extent that the income or capital gains are due to the personal efforts of your spouse. In other words, if your spouse has worked to produce income from your separate property or to increase its value, he or she can claim a portion of the income or increase in value as marital property.
One final point to remember is that it is up to the judge in your case to classify your property as separate, marital or hybrid. These classifications are considered “findings of fact,” meaning that if you believe the judge made a mistake, your burden on appeal would be to show that the judge’s decision was plainly wrong or unsupported by the evidence.
The Presumption Of Marital Debt
Virginia law treats debts much the same as property for purposes of equitable distribution. Marital debts are included in the overall “marital estate” to be divided, while each party will be responsible for their own separate debts. Under Virginia Code § 20-107.3 as it was amended in July 2011, all debt incurred by either party after the date of marriage and before the date of separation is presumed to be marital—regardless of whether the debt is in the names of both parties, or only in the name of one party. However, if one party can prove that a debt was incurred, in whole or in part, for a “nonmarital purpose,” the court may designate that debt as the separate property of the party who incurred it.
Example: During the marriage and prior to the final separation of the parties, Husband runs up $10,000 on a Macy’s charge card in his name alone. Under Virginia law, that entire debt is presumed to be marital, meaning it will be included in the marital estate for purposes of equitable distribution. However, if Wife can prove that Husband charged the $10,000 not for the benefit of the home, but on gifts for his mistress, then the court will classify the entire debt as Husband’s separate property—meaning Wife will not have to contribute a penny toward its repayment.
It was not always this way. In April 2010, in the case of Gilliam v. McGrady, the Virginia Supreme Court stated that debts jointly incurred during the marriage were presumed marital unless proven otherwise, and debts individually incurred during the marriage were presumed separate unless proven otherwise. The husband in Gilliam had racked up hundreds of thousands of dollars in tax debt for his business during the marriage. The wife challenged that this individually-incurred debt should not be presumed marital since she had no knowledge of her husband’s business dealings, and the Virginia Supreme Court agreed. To many, this seemed only fair—if you incur the debt for your own personal use or due to your own financial mismanagement, you should bear the responsibility of proving that it was a marital expense.
Therefore, if a woman were divorcing her spendthrift husband in the summer of 2010, his Best Buy balance, incurred during the marriage, would be classified as the husband’s separate debt unless he could prove his subwoofers, iPad and laptop benefited the marriage or family. However, with the amendment to Virginia Code § 20-107.3 in July 2011, that result is now reversed—the burden would now be on the wife to prove that the husband incurred the Best Buy debt for a nonmarital purpose.
Marital Waste or Dissipation of Assets
A spouse who misuses or deliberately disposes of marital property to purposefully deprive the other spouse of their share upon divorce has committed “marital waste” or “dissipation of assets.” The court has authority to consider such behavior in making an equitable distribution award.
But how does the court know when marital waste was purposeful? The general rule in Virginia, stated in Booth v. Booth, 7 Va. App. 22, 371 S.E.2d 569 (1988), is that “waste may be generally characterized as the dissipation of marital funds in anticipation of divorce or separation for a purpose unrelated to the marriage and in derogation of the marital relationship at a time when the marriage was in jeopardy” (emphasis added). The following hypotheticals should illustrate this definition, although every case depends on the individual facts and circumstances:
Hypothetical 1: Husband has been struggling lately to meet expectations at work and at home. He decides to take a trip to Atlantic City with some friends to get away from it all. Unfortunately, while there, he ends up losing $10,000 at the craps table. Wife decides that she has had enough of Husband’s irresponsible behavior, and files for divorce. Can Wife argue that Husband dissipated $10,000 from marital funds?
Answer: Probably not. There is no evidence in this scenario that Husband gambled away the money in anticipation of divorce or separation.
Hypothetical 2: Husband and Wife have been separated for a few months now and are in the process of divorce. Husband learns that Wife emptied $40,000 from their child’s college fund. When Husband asks Wife about it, she tells him that she gave the money to a relative to pay off a loan. Can Husband argue that Wife dissipated $40,000 from marital funds?
Answer: Probably yes. Here, there is evidence that the marital funds were used in anticipation of divorce or separation, and the funds were used for a purpose unrelated to the marriage.
Hypothetical 3: Husband and Wife have filed for divorce and are awaiting their equitable distribution trial. Through the discovery process, Wife learns that Husband has cashed out $20,000 from his 401(k) plan to pay his attorney’s fees to litigate the divorce. Can Wife argue that Husband dissipated $20,000 from marital funds?
Answer: Probably not. Although the funds were spent in anticipation of divorce, courts have often found that payments for reasonable living expenses, support, and attorney’s fees do not constitute waste.
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- Equitable Distribution: Using Separate Property For A Marital Loan
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