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Division And Allocation of Assets And Liabilities in Divorce
(provided by James H. Allison, Attorney at Law)
In general, Ohio courts attempt to order an equal division of all assets and liabilities between spouses in a pending divorce case. The assets and liabilities that are acquired during the marriage are a result of certain actions and efforts expended by each party that resulted in the accumulation of those assets and liabilities. Certain property that is owned by a party prior to the marriage is classified in Ohio as "separate property" and to the extent possible and traceable, it is set-off to the owner of that property as his or her own asset before all of the remaining "marital assets" acquired during the marriage are equally divided.
Property received by a spouse as a gift or inheritance from someone other than a spouse, to the extent that it was not commingled and made a part of all marital assets, will also be considered as separate property and awarded to the owner spouse, free of any claim of the other spouse, before dividing the marital assets on an equal basis.
Separate property that is considered owned only by one spouse and not subject to division during the divorce as marital assets, is property designated and listed as a non-marital asset on a separate schedule of assets in the name of a spouse in a prenuptial agreement prior to the marriage of the spouses.
Certain separate property that is inherited by one spouse can be increased in value by the contributions made to the value of that asset by the other spouse and the increase in the value of that asset during the marriage becomes a marital assets that is subject to equal division between the two spouses. A typical example of such an increase is where one spouse owned a residence or a business prior to the marriage and the other spouse took care of, managed, or maintained that asset during the marriage, causing that asset to increase in value. Usually, the contribution to the increase in the value of that asset is a result of the time and effort expended by both parties during the marriage.
Except for consideration and allocation of property owned by one spouse prior to the marriage, the courts in Ohio will divided the net equity in all assets on an equal basis to the extent possible. Full consideration of any debt or mortgage associated with that property will be taken into account so that the debts are evenly divided if possible, provided a spouse has the ability to assume and pay that obligation. The court can deviate from making a pure 50/50 allocation of assets and debts if there are unusual facts or circumstances whereby one spouse made a unique contribution during the marriage, including such items as extraordinary time spent by a spouse in the care, maintenance and education of a child or contribution of time and effort spent on an asset such as the marital residence or a business that increased in value during the marriage. The court will consider the economic circumstances of both parties and the duration of the marriage if there are any unusual contributions surrounding those issues. If one spouse has made a substantial contribution to the career or educational opportunities and achievements of the other spouse, the court can award something other than a 50/50 split of the assets.
In some cases where one spouse owns a business or professional practice that provides income for the family, the court can award that asset entirely to the one spouse active in that enterprise and then devise innovative ways to pay the other spouse an interest in that asset.
In cases where there are minor children who are well established in a neighborhood and very secure in their daily routine, the court can allow the custodial spouse to remain in the residence with the children when it is in the best interests of the child or that spouse to do so and then arrange for the sale or purchase of the other spouse's net equity in that property at some point in the future. The other spouse's interest in that asset can be secured by a Note and Mortgage to avoid any problems in the event that the spouse remaining in the residence should remarry.
If a spouse has intentionally destroyed or depleted a marital asset, or obtained certain assets and spent them without the knowledge or consent of the other spouse, the court can place the value of that asset on that particular spouse's side of the ledger sheet and award other assets to the other spouse to compensate the other spouse for the actions of the spouse destroying or spending those marital assets prior to or during the divorce. It is customary to seek Restraining Orders from the court preventing the destruction, transfer, or dissipation of any assets and such Orders are routinely sought and granted by the court when the initial divorce case is filed in order to prevent the destruction or dissipation of bank accounts, securities, and other assets accumulated during the marriage.
Retirement benefits that accumulated during the marriage are marital assets and are counted the same as any asset. If a retirement plan is in place that pays a certain monthly benefit at a certain age on retirement, an Actuary can be hired to perform an evaluation of the present value of those future payments and determine the current equity for purposes of allocating assets in the divorce case. A Qualified Domestic Relations Order (QDRO) can be filed with the court and the Retirement Pan Administrator, allocating those assets into two separate accounts to be paid to each spouse at some point in the future. The adoption and implementation of a QDRO allows the benefits in a retirement plan to be allocated between the spouses at the present time, during the divorce case, without any tax consequences until the actual payments are paid out of the plan to the husband or wife.
Country club memberships or athletic club memberships have certain written rules governing to whom the membership benefits will pass in the event of a divorce between members. Many clubs do not allow the husband and wife to continue as joint members in the club after a divorce. If the membership is in the name of the husband, he most likely will retain the membership according to the written rules of the club. If the membership is joint, the club may permit a continuation of the membership, but the rules of the club need to be reviewed to ascertain if such is possible. The membership in a particular club may have a monetary value that accrued during the marriage and as such, can be listed and allocated on the marital asset balance sheet.
In Ohio, each spouse has a "dower interest" in all real estate owned by the other spouse. This prevents the spouse who owns the property from selling that property without the signature of the other spouse during marriage. If a spouse represents that he or she is not married and then signs a deed for real estate in Ohio to a third person purchaser, the transfer of the property can be set aside upon the filing of the appropriate legal action.
Many credit card companies will not close an account until the balance owed to them is paid in full. When a spouse abuses the use of a credit card, the spouse who created and owns the account can contact the credit card company and advise them in writing by certified mail that any charges made in the future by the other spouse are to be denied at the point of the transaction and set-up a control on the records of the credit card companies so that the computer rejects the charge if it is attempted. Some credit card companies will cancel the existing card and account number and issue a new card in the name of the spouse requesting same, which prevents a spouse from making more charges on a credit card that are done in spite or are not warranted. A person wanting to cancel a card or place limitations on the use of the card must call the phone number on the back of the card or upon the monthly statement, obtain the name of the person that the message was given to, including their address, and then confirm in writing to that person at that address so that cancellation or the limitations are placed upon the card.
Automobile leases present special problems to spouses who have both signed the lease. If a spouse fails to make the payments due on the lease, the leasing company can force the other spouse to make the payments, regardless of who has possession of the automobile. Leasing companies do not normally release a spouse from the liability on an automobile lease until the balance due on the lease is paid in full or the automobile is sold at auction and the sale proceeds applied to the balance due, in which case the deficiency judgment must also be paid in full before both spouse are released of all liability on the contract.
In some cases, the automobile leasing company or the bank having a mortgage upon real estate will terminate the liability of one spouse upon the application of the other spouse to refinance the debt, pay it off in full, and create a new obligation to be signed only by the spouse applying for the new loan. In those cases where refinancing is too expensive or not feasible on such an obligation, the court can enter an Order that the spouse taking over the debt hold the other spouse harmless and indemnify them from any collection due on that obligation. If the spouse to whom the debt is assigned fails to make the payments, the other spouse may file the appropriate legal action with the court to collect monies to reimburse that spouse for any monies he or she had to pay because of the failure of the other spouse to make the payments as ordered by the court.
The debt owed to the Internal Revenue Service is owed by both spouses if they filed a joint tax return. In some circumstances, the liability to pay that tax may be limited for one spouse if that spouse had absolutely no knowledge of the obligation such as debts associated with the other spouse's business. In such a case, a special rule called the "Innocent Spouse Doctrine" may exempt the spouse who has no knowledge of that debt from liability on that specific item.
Information provided by:
James H. Allison, Attorney at Law located at
http://www.divorcesource.com/OH/DS/allison.html
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