Whether you choose divorce mediation, Collaborative Divorce, or a conventional adversarial divorce, one of the main tasks you will do as part of your divorce or separation is to figure out who gets ownership of items of property and responsibility for specific debts. This “property division” is part of every dissolution of marriage (divorce), legal separation, and the breakup of every committed intimate relationship.
If you live in the Seattle or King County area, and would like to reach agreements about your finances, including property and debts, please contact Seattle divorce mediator Mark Weiss by completing the form on this page.
“Property” (in the divorce-sense of the word) includes accounts, personal property, real estate, securities, business interests and professional goodwill, future expectancies, stock options and awards, retirement plans, and even airline miles and club memberships. Debts include credit cards and mortgages, but also contingent liabilities and contractual liabilities.
In mediation, we work together to consider the options to find a property division that is agreeable both to you and your spouse. We will work to help you identify what is most important to your future, your goals, your concerns, and your objectives. We often explore the range of options available and the inevitable financial and tax implications of each option to help you make the best choice. Considering your goals and objectives, and all other important considerations, we then discuss ways to allocate your assets and debts in a manner that best addresses your unique situation so both of you can have clarity for your future while minimizing unintended consequences. Once everyone is satisfied, we write it up. Although the focus in mediation is to arrive at solutions that will work in the real world for your unique situation and given your specific objectives, we may consider how the law would consider the property or debt, if that is important or helpful to you.
For those going to court instead of making their own decisions, the law directs Washington courts to make a “just and equitable” division of all property and debt. What is “just and equitable” is based on individual considerations. Washington courts often make disproportionate (unequal) property awards based on the judge’s view of the equities. For example, a judge might award more than half the property to a spouse who is viewed as economically disadvantaged, particularly after a longer marriage. There is no formula or percentage that is automatically used. The decision is based on what the judge believes is “just and equitable.
And, while Washington is a “community property” state, in a divorce all property—both community and separate property—is considered and subject to being divided. Although there might be a preference to award one spouse’s separate property to that spouse when reasonable to do so, the law gives judges the authority and discretion to award separate property to the other spouse. That authority is commonly exercised when considering the factors for property division, including:
- The nature and extent of the community property;
- The nature and extent of the separate property;
- The duration of the marriage;
- The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to a spouse with whom the children reside the majority of the time.
Interrelated with a property division is the flexible concept of maintenance (often called alimony or spousal support in other states). The court will typically award maintenance if one spouse has been out of the workforce for some time, or needs re-training to become self-sufficient. After a long-term marriage, the court will often try to equalize the parties’ standard of living for the rest of their lives, through a combination of a disproportionate property division and/or an award of maintenance in favor of the economically disadvantaged spouse. An award of maintenance and a disproportionate property division is much rarer following a short-term marriage, when the court will often try to place the parties in a similar financial position they would have enjoyed had they not married.
There are many tools available to create a workable division of property. When working with Mark Weiss as your divorce mediator, he helps to analyze your financial situation, educate you about the options and major tax impacts, and weigh the range of possibilities, so you can make the best possible decisions.
Frequently Asked Questions (FAQs)
What happens to property that is not divided? If property is not listed in the decree as being awarded to one party or the other, it will continue to be owned by both parties. This is one reason why you should fully disclose and list all property.
How do we divide our house? Here are the two most common options. First, the house could be listed and sold, with the proceeds divided. There are several benefits to this, including that the closing costs will be shared, both parties will be released from the loan, and possible tax benefits. The second most common option would be for one spouse to be awarded the house, with the other party to be cashed out immediately or over time. A real estate appraiser’s services are commonly used to value real estate when one party will remain in possession. There may be some other possibilities, including continued co-ownership, which you should discuss with your attorney and tax advisor.
How does a divorce affect my ability to get a mortgage? Many financing options will not be available once a divorce petition has been formally filed with the court. For that reason, it is often best to address mortgage issues before filing a petition with the court, or after a case has been concluded. This is one of the main reasons why the formal court filing is often delayed in a collaborative divorce.
Does property division give rise to capital gains taxes? Generally not at the time of the dissolution of marriage, although there can be tax consequences when real estate is sold. A transfer of real estate to a spouse as part of a divorce is even exempt from the real estate excise tax.
I am a member of a club. Should the membership be listed in the decree? Yes. Club memberships are considered to be “property” for purposes of dissolution of marriage, and should be listed. So should frequent flyer miles, season tickets, and possible lawsuits against others. Another item of property often overlooked is accrued vacation pay.
My husband is a physician. Is his practice worth anything? Possibly. A professional who is also an owner or co-owner of his or her practice may have “professional goodwill,” which is an asset to be divided in a dissolution of marriage. A professional who is just an employee of a large practice group probably does not have professional goodwill.
How do we divide a retirement savings and pensions? There are a number of ways to accomplish this. The easiest way is to simply award a larger amount of other property to the other spouse. Otherwise, most pensions can be divided with court orders. For so-called “qualified plans” (for instance, 401K plans), a special “qualified domestic relations order” (QDRO) is required. For IRAs, the property division can simply be in the Decree. When dividing a pension plan or IRA (other than a Roth IRA or Roth 401K), remember that it has pre-tax dollars. Whoever makes the withdrawal must pay the taxes and penalty, if the withdrawal is made before age 59-1/2 (there is one circumstance when the 10% penalty may be waived). If the pension plan is a traditional “defined benefit” plan, some economic calculations can be made to estimate the value. Issues surrounding retirement plans can be complex, and it is best to get professional assistance. This assistance is part of the divorce mediation with Mark Weiss.
If you live in the Seattle or King County area and would like to learn more about reaching agreement about your finances, including property division, please contact Seattle divorce mediator Mark Weiss at (206) 622-6707.
What about stock options, restricted stock, and awards? There are different types of stock option grants and restricted stock unit (RSU) awards that may be treated differently. Most plans prohibit a direct transfer of ownership, but there are approaches to address those limitations that can work well in divorce. Exploring the approaches that are specific to your situation, and the type of grant, is part of the mediation process. There are complicated tax rules for certain types of options and awards, making it best to obtain qualified tax advice.