All assets and liabilities identified and characterized as the spouses’ community property must be divided between the spouses in a “just and right” manner, taking into account the rights of each spouse and any children of the marriage.
A “just and right” division can be a 50/50 split or a disproportionate split, depending on whether the circumstances justify awarding one spouse more than half of the community estate.
Whether the court’s division of the community estate was “just and right” will be evaluated based on the net equity value received by each spouse.
The court can consider the following non-exclusive list of factors when making a “just and right” division of the assets and liabilities:
Factors based on need for support
The court can consider each spouse’s need for future support.
1. Children of the Marriage – The court can consider which spouse has custody of the couple’s minor children.
“Unequal property division was based in part on mother’s custody of daughter.” Pang v. De Santis
“Court could consider that wife assumed sole responsibility for taking care of severely disabled adult child when dividing property.” Walker v. Walker
“Child’s best interest was to remain in marital home where special air filtration system was installed.” In re Marriage of Thurmond
“Larger car was more suitable for transporting three children.” Karenev v. Karanev
2. Education and Employability – The court can consider the disparity of earning power between the spouses, as well as the spouses’ respective business opportunities, education, capacities, abilities, and future employability.
“Court considered disparity in income between parties and fact that wife had to “start anew”.” Warren v. Warren
3. Size of separate estates – The court can consider the value of the spouses’ separate property and their relative financial condition.
4. Health – The court can consider the spouses’ health and relative physical condition.
“Court could consider wife’s disability resulting from injuries inflicted by husband when dividing the community estate.” Cravens v. Cravens
“Court could consider evidence of husband’s bone cancer when dividing the community estate.” White v. White
5. Age – The court can consider the spouse’s age, usually as related to earning capacity and health.
6. Liquidity and Income Production – The court can consider the liquidity and income producing potential of the property allocated to each spouse.
Factors Based on Wrongdoing
The court can consider the spouses’ wrongdoing or unjust conduct when dividing the spouses’ community estate.
1. Fault – The court can consider fault in the breakup of the marriage.
The most common forms of fault are:
Cruelty – other spouse’s cruel treatment that rendered further living together insupportable
Felony Conviction- convicted of a felony and has been imprisoned forat least one year
Abandonment – other spouse voluntary left and remained away for at least one year.
“because husband was not “innocent spouse,” he received a smaller share of the community estate.”
2. Fraud on the Community – the court can consider whether one spouse committed actual fraud or constructive fraud (waste) in transactions involving community property
a. Actual Fraud – must show:
- the other spouse transferred community property
- for the primary purpose of depriving claimant of property
- with dishonesty or intent to deceive
b. Constructive Fraud – must show
- the spouse transferred community property
- at a time when the spouses were fiduciaries
- without the other spouse’s knowledge or consent
3. Torts– the court can consider one spouse’s tortious conduct against the other spouse
Factors Based on Financial Costs
The court can consider the financial costs incurred by a spouse while the suit is pending in dividing the community estate.
1. Temporary Spousal Support paid – The court can consider one spouse’s payment of temporary spousal support while the case is pending, and offset this amount in the property division
2. Expenses paid to maintain community property – The court can consider the expenses on spouse paid to maintain community property while the case is pending
“Husband’s IRA was awarded to wife because wife had exhausted her IRA to maintain family business during divorce.”
3. Attorney Fees and costs incurred – The court can consider the attorney fees and costs each spouse incurred in litigating the suit.
4. Tax Consequences of Division – The court can consider the tax consequences that may result from the division of the community estate. Specifically, the court can consider whether an asset will be subject to taxation and, if so when the tax payment will be paid.
Some of the more common tax liabilities that property could be subject to in the future include:
a. Capital gains or losses – The court can consider whether an asset will be subject to capital gains or losses if the asset is sold or exchanged later.
Generally, the transfer of property as a part of a divorce does not result in any tax liability. When an asset is transferred as part of a divorce, the transferee spouse will receive the transferor’s tax basis in the asset. Thus, the assets are transferred from one spouse to the other without recognizing any capital gains or losses.
Capital gains or losses associated with the asset will only arise if the transferee spouse later tries to sell the asset.
b. Income Generating Property – The court can consider whether an asset will generate future income that will subject a spouse to additional income-tax liability.
In particular, if the asset is an IRA, a 401(K), pension or other retirement plan, funds distributed from the account plan are in most cases considered ordinary income and subject to ordinary income taxation.
c. Tax Penalties – The Court can consider whether an asset will have tax penalties associated with its future use.
- If funds are withdrawn from an IRA, 401(K), or pension plan before the employee reaches 59 & ½, dies, or is disabled, there is a 10% penalty on the early withdrawal.
- The 10% penalty also applies to payment of certain life insurance policies known as modified endowment contracts.
Other Factors the Court can Consider
1. Length of the Marriage
2. Nature of Property – The court can consider each party’s relationship to the property
a. One spouse may be better suited to manage the property.
“Husband was awarded assets related to his oil and gas business.” Kimsey v. Kismey
“Husband was assigned debts related to towing business he was awarded.” Karenev v. Karenev
b. Property must be held by spouse who holds a license.
“Wife could not be awarded Husband’s interest in Husband’s professional association because Wife was not a licensed physician.” Eikenhorst v. Eikenhorst
c. One spouse may be able to make use of a particular item of property.
“Husband was awarded the trailer because he had a truck that was capable of pulling it.” Riley v. Riley
d. The source of the property is closely associated with one spouse.
“Court awarded house to wife because it was purchased from her parents.” Phillips v. Phillips
e. The property was acquired solely or primarily through only one spouse’s efforts. Hailey v. Hailey
f. The property is more valuable to one party because the property is exempt from being seized and sold to creditors.