Indiana Property Division 101

Marital Property MediationMarital property division is one of the two major issues of contention between the divorcing spouses, trailing just slightly behind child custody issues.  For childless couples, it is the only issue.  Indiana law presumes all property of the spouses regardless of how it is titled or whether it was acquired before or during the marriage is marital property and subject to the division and distribution of the court.  It also presumes an equal property division absent convincing rebuttal evidence.

Many litigants often, erroneously, believe marital property should be divided based on how it is titled, when it was acquired, who earned it, or who is more entitled to it based on perceived innocence or guilt in the break-down of the marriage.  Although these are factors the court will look at and consider; a party must present more to overcome the presumption of an equal division (50/50) between the parties.

Indiana Code § 31-15-7-5 states, “The court shall presume that an equal division of the marital property between the parties is just and reasonable. However, this presumption may be rebutted by a party who presents relevant evidence, including evidence concerning the following factors, that an equal division would not be just and reasonable.”  (The “following factors” will be discussed in further detail below.)

 

What is marital property?

Marital property is sometimes called the marital estate, and the terms are used interchangeably.  Any and all property owned by the spouses either jointly or individually before the final separation of the parties is part of the martial estate.  The final separation is the date of filing for dissolution with the court, unless the parties agree to an earlier date.

Indiana Code §31-15-7-4(a) defines marital property as:

  • Property owned by either spouse before the marriage
  • Acquired by either spouse in his or her own right after the marriage and before the final separation of the parties or
  • Acquired by their joint efforts.

In other words, separate/individual property brought into the marriage becomes martial property.  Property acquired or earned solely by one spouse during the marriage is marital property, even though the other spouse contributed nothing to it.  Gifts and inheritances to one spouse are included in the marital estate.  And it goes without saying that property acquired by joint efforts is marital property.

Parties often argue property they owned before the marriage is their separate property, and therefore immune from the martial estate and division.  Likewise, the same argument is often made for property acquired during the marriage due to one spouse’s greater efforts or perceived separate resources, such as the sale of pre-marital property or employment income.  These arguments; however, will fail attempts at exclusion.  The only way to avoid inclusion of property in the marital estate is to execute a Prenuptial or Post-nuptial agreement identifying which property remains the separate property of each spouse.

How is marital property divided?

Notwithstanding the broad and all-encompassing definition of marital property, there is a distinction between the identity of marital property and its division and distribution.  As such, if a party is concerned the court will designate to his or her spouse any family heirlooms, pre-marital property, gifts, or other property obtained through individual effort, that will not necessarily occur.  Instead, such items of property, although deemed part of the marital estate, can and most likely will be awarded to the party and included as part of his or her share of the equal division of property.

Under Indiana Code §31-15-7-4(b) the court can distribute marital property as follows:

  • Division in kind
  • Awarding property to one spouse and ordering an equitable payment to the non-recipient spouse in one lump sum or installments
  • Order the sale of property and the division of the proceeds, and
  • Order the distribution of delayed benefits after the dissolution.  Delayed benefits include, but are not limited to, investments such as retirement plans or third party settlements or claims arising during the marriage.

If the value of the above property exceeds half the value of the marital estate, the recipient party can either present evidence to rebut the presumption of equal division, or the court could order an equitable payment be made to the other spouse in an amount equal to the value of the property that exceeds half the value of the marital estate.  For example, if the parties have a marital estate valued at $100,000.00 and Spouse A is awarded property valued at $60,000.00 due to the above factors and Spouse B is awarded the remaining property valued at $40,000.00, the court would order Spouse A to pay Spouse B an equitable payment in the amount of $10,000.00 to make the property division even.  Alternatively, Spouse A can argue  the presumptive equal division is not just and reasonable, and therefore request a greater share of the marital estate to eliminate the need for an equitable payment to Spouse B.

What Factors are Considered in Property Division?

Generally, the court will look at the following factors in determining the amount and division of the marital estate and specific items of property.  These factors are not exhaustive or exclusive and you will note the specific considerations for each factor will overlap.

1.  The contribution of each spouse to the acquisition of the property, regardless of    

whether the contribution was income producing. 

To determine the contributions of each spouse to the acquisition of property, the court

will examine the lifestyles and behaviors of the spouses.  Was one spouse, for lack of a better term, a deadbeat during the marriage forcing the other spouse to do all of the work to keep the family afloat?  Did both parties contribute to the function of the family, although in different ways such as one spouse working outside the home to earn income while the other spouse ran the household and cared for minor children?  Did either of the spouses of the parties give up anything for the acquisition of the property?  Was the value of property increased due to the investment, efforts, or labor of one or both spouses?  Did the parties share a joint checking account into which they both deposited their income and paid expenses and debts?

2.         The extent to which the property was acquired by each spouse before the marriage or through inheritance or gift. 

The court will look at who brought what property into the marriage and the length of

time it was owned prior to the marriage.  It will examine the value of the property at the time of marriage and the time of the divorce, along with the amount of equity and debt in the property.  Was the property comingled with other marital property making it difficult to separate?  As for inheritance, was it comingled or kept separate?  Was inheritance used to acquire marital property?  Have marital assets been used to maintain or increase the value of the pre-marital property?

3.         The economic circumstances of each spouse at the time the disposition of the property is to become effective, including the desirability of awarding the family residence or the right to dwell in the family residence for such periods as the court considers just to the spouse having custody of any children.

Here the court will consider each spouse’s financial position when the divorce is final

including the employment and income of one or both spouses, the need for the spouse who cared for the home and children to find outside employment, the solvency of the marital estate, or the undertaking of marital debt by one or both spouses.  The court will also consider tax consequences of property distribution, and whether one party is in a better financial position than before the marriage due to the contributions of the other spouse.

4.         The conduct of the parties during the marriage as related to the disposition or dissipation of their property.

Who was the money manager in the marriage?  Did either spouse dissipate marital assets and commit financial waste through activities such as gambling, an affair, substance abuse, or excessive spending?  Was there financial honesty in the marriage?  Did either spouse segregate income or assets in separate accounts?  Did one spouse withhold assets or funds from the other spouse?  What was the extent of the contributions from each spouse to the joint living expenses?  Did one spouse financially control the other?

5. The earning ability of the parties as related to a final division of property and a final

determination of the property rights of the parties. 

The court will consider the age, health, education and work experience of each

spouse and the employment opportunities available to them.  Does either spouse receive any sort of public assistance or disability?  Did either party give up employment, educational opportunities, or training for better job prospects to manage the home and care for children?  Is either spouse deliberately under employed?

With the foregoing in mind, divorcing parties are always free to determine the division of their property if they can agree and the court is satisfied there has been fair bargaining.  Having a general understanding of how a court defines and determines property division can better enable a party to make informed decisions, communicate with their attorney, negotiate a marital settlement agreement, and/or prepare for a contested hearing.