How Do Courts Decide On Dividing Money In Divorce?

Money is like any other asset when it comes to equitable distribution. Money in a bank account can be either the separate property of one spouse or marital property that belongs to both. Money, however, has some unique wrinkles, because it often can become “commingled,” which makes it hard to decide whether the money is really separate or marital.

Determine The Marital Character Of The Money

Ohio law is clear about whether an asset is separate or marital. Separate property is anything acquired before the date of marriage, or any inheritance or gift received by the spouse while married. ORC 3105.171 also lists some other exceptions, such as compensation received for a personal injury and any property identified as separate in a valid prenuptial agreement.

This means that if you entered the marriage with $20,000 in a savings account, that should be your separate property which is not subject to equitable distribution on divorce. However, wages earned while married will be considered marital.

Analyze Commingled Assets

Sometimes, questions arise about whether the money is separate because it has been mixed in with marital assets. This is called “commingling” assets, and it creates a headache during a divorce.

Imagine that you entered a marriage with $20,000 in a savings account. However, you deposit your paycheck into the same account even after getting married. You also pay bills from this account. When you decide to divorce 10 years later, it can be very difficult to identify how much of the money in the account is still “separate” versus “marital.”

As experienced lawyers, we can work to trace the money to try and identify whether it is separate. However, husbands and wives will ideally keep separate property in a separate account and never commingle, to begin with. For example, if you inherit $50,000 from your parent’s estate, put the money in a separate account and never deposit marital property into it.

Also, keep careful records of what you spend separate money on. Money can become commingled when it is invested in a marital asset, like a home or a retirement account, and it can lose its character as separate property in this manner.

One thing to keep in mind: passive income or appreciation is considered separate property under ORC 3105.171(A)(6)(a)(iii). So if you have money in a savings account earning interest, that interest should be considered separate, even if it accrued while married.

Protecting Money While Divorcing

Money differs from other assets in the ease with which someone can spend it. It’s hard to quickly get rid of a piece of property. By contrast, it is easy to blow $50,000. Many of our clients fear that their spouse will go on a spending spree while the divorce is pending, which reduces the value of the marital estate.

To protect our clients, we request detailed financial documents of all accounts. Someone who spends money unreasonably could be “wasting” marital assets. A judge will take this factor into consideration when dividing the marital estate.

Dividing Property Equitably

When it comes to dividing the marital estate, courts operate under the equitable distribution scheme outlined in Ohio law. Of course, our clients can always divide the property with their spouse by themselves. When that is not possible, a judge will step in.

Money is included in the pot along with all other marital assets. Fortunately, money presents no problems when it comes to valuation, unlike other assets (such as real estate or business interests). The judge arrives at the total value of all assets and then divides them after considering relevant factors laid out in subsection F of the statute. Some of the more important factors include:

  • The duration of your marriage
  • How liquid the marital property is
  • Each spouse’s assets and debts
  • Tax consequences

As stated in the law, a judge can consider any factor that is “relevant and equitable” and typically includes the contributions you made to the marriage, whether financial or non-financial.

Reasons To Request Cash In A Divorce

If the marital estate has cash, you might want to request it in the event you also get a share of the marital debts. It is much easier to pay off debts with cash than having to actually sell a property. This is definitely something to consider.

For example, you might get a car but also a car loan. If you can take some of the cash from the marital estate, it will be easier to pay off the car loan than if you got a share of a retirement account or some other illiquid asset.

Contact Lawrence Law Office today to discuss how best to divide your marital property. You can schedule an initial consultation with a member of our team.