When a couple divorces, any assets or property acquired during the marriage have to be divided. The marital estate is created when a party files an action for separate maintenance or divorce. With a few exceptions, whatever assets or debts exist as of the date of filing of marital litigation will comprise the marital estate. Thus, the family court must first identify the parties’ marital property in existence on the date of filing. Generally, any asset acquired during the parties' marriage is marital property, whether it be money, investments, personal property, real estate, or retirement. Inherited property of one spouse during the marriage and any gifts from third parties to one spouse during the marriage are not marital property as long as it is kept separate. Additionally, if you own property in your own name prior to marriage, South Carolina law will protect it as your separate property not subject to division as long as you have kept it separate.
Non-marital and pre-marital property can become marital property during a marriage if the parties use it in support of the marriage, commingle it with marital property, or evidence an intent to make it marital property. For example, if you own a house prior to marriage, and after marriage, you put your spouse's name on the deed as a joint owner, the house will be considered marital property. If you inherit money during the marriage and deposit the inherited money into a joint bank account, or purchase a joint asset with the money, the money will be considered marital property.
Once the family court identifies the parties' marital property, the next step is to determine how to divide it. South Carolina is an equitable distribution state, meaning, the family court considers the monetary and indirect contributions of both parties in the acquisition and upkeep of their marital assets, as well as other factors that are set forth by statute, such as, but not limited to, marital fault, the ability of each spouse to earn money and acquire assets in the future, the parties ages, whether either party has any non-marital property, the length of marriage and the educational background and work history of each party. The majority of the time, marital property is divided equally between the parties; however, depending on the facts and circumstances of any given case, marital property can be divided with one spouse receiving more or less than 50%.
Typically, the two largest assets that people own are their house and their retirement accounts, both of which will be marital property if purchased and acquired during the marriage. One of the first questions many people ask is do I have to sell my house? Ask yourself: What is the value of your house after paying off the mortgage, paying realtor fees and closing costs? How long will it take to sell the home? What are your alternative living options short and long term? Can you afford the house considering the mortgage, real estate taxes, homeowner's insurance, and upkeep? Will you qualify to refinance the mortgage using only your post-divorce financial profile, and will you have to borrow additional money to pay your spouse his or her share of the equity in the home? It may be important to get a fair and accurate appraisal in order to divide the property equitably.
To divide a workplace retirement plan like a 401(k), 403(b), or a pension plan, a court issued document called a qualified domestic relations order (QDRO) is required. This allows one spouse to transfer money from their retirement account tax free and penalty free to the other spouse by acting as a rollover mechanism. If the spouse receiving the money then wants to access the money, they will pay any taxes and penalties on the withdrawal and not the spouse who has transferred the money.
To divide an IRA or health savings account (HSA), financial institutions generally require the parties to submit a "transfer incident to divorce" form as well as a copy of their divorce decree. This money is also rolled over tax free and penalty free to the other spouse, who may keep it in the qualified plan, or withdraw it and access the cash in which case they will pay the taxes and penalties associated with the withdrawal.
Property division in family court can become quite complicated if spouses own their own businesses, have diverse property interests with third parties involved or own assets that are difficult to value. In these cases, it may be necessary to retain a financial expert to help identify and value the parties' marital assets.
There are numerous considerations in any marital property division regardless of how large or small the marital estate. Having an experienced, knowledgeable attorney advocating your position can be a valuable service in determining how best to move forward, and we at Barrett Mackenzie are here to help.