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Property, What is it Worth

By Carol Ann Wilson

Letís look at an example. Beth and her husband are getting a divorce. When Beth got married, she had $1,000 in a savings account. During the marriage, her $1,000 earned $100 in interest. Her account in now worth $1,100. She did not add her husbandís name to the account when they married.

Her property is $1,100, because she kept it in her name only. In some states, the $100 in interest goes into the pot of marital assets to be divided because that is the increase in value of her separate property. If Beth had put her husbandís name on the account, she would have turned the entire account into a marital asset. She would have made a gift to the marriage.

In second or third marriages; both people may bring a house into the marriage. Suppose that Beth had a house when she got married, which she kept in her name only. At that time, the house was worth $100,000 and had a mortgage on it of $70,000, so the equity was $30,00! 0. Now Beth is getting divorced. Today the house is worth $150,000. The mortgage is down to about $50,000. Equity has increased to $100,000.

At Marriage

At Divorce

$1000,000 Value

$150,000 Value

-70,000 Mortgage

-50,000 Mortgage

$ 30,000 Equity

$100,000 Equity

These numbers lead to only one conclusion in the valuation of property. The increase in value is the increase in the total equity, or $70,000.

Letís reverse the situation. Assume Beth put her husbandís name on the deed to the house when they got married. After all, they were going to be together for the rest of their lives.

As soon as Beth put her husbandís name on the deed, the house was turned into a marital asset. She gave what is called a presumptive gift to the marriage.

What if Beth owned stock worth $10,000 when she got married? On the day of the divorce, it is worth $9,000. Is that a $1,000 marital loss? Yes. If there is a marital increase on one asset, it can be offset with a marital loss. If Beth had owned a house and it had decreased in value, the same would apply.

Assume that when Beth got married, her husband gave her an eight-carat diamond ring. Letís assume that they are in court! and she is testifying that the ring was a gift from her husband so it is her personal property. He says, ďAre you kidding? I would not give you an eight-carat diamond. That was an investment, so therefore it is marital property.Ē

The judge decides. Typically, however, women get to keep their jewelry, their furs, and similar types of gifts. Men get to keep their tools, their guns, and their golf clubs.

What if Bethís husband had given her an $80,000 painting for her birthday? She claimed it was a gift and he claimed it was an investment and therefore should be treated as marital property.

In the case; the judge called it an investment. Because it was not the type of thing that most people would freely give as a gift, it was seen as an investment for the family so it was considered marital property. But remember, you can never predict what the judge will decide!

What happens when both parties want the same item? Letís say Beth and her husband had divided all their property except for one item. They couldnít agree who was going to get the antique crystal that had come from England.

Reason and logic is needed here. Negotiation skills come into play, along with a need to prioritize what is wanted, along with the value of the item. We know that emotional value is a factor and canít be measured. When both spouses want the same item, obtaining an item can become an out-of-control quest. We have seen cases where the item may have originally cost a few thousand dollars, and the couple spends mega thousands trying to ďwinĒ it in the courtroom. Instead of spending the money for attorneys, Beth and her husband could take the savings and return to England to buy a new set!

When it comes to home furnishings, most values are fairly low. Home furnishings arenít usually included on the list of assets, because couples just divide them up. If they are to be valued, the typical value is what you can get from a garage sale.

Source: The Dollars and Sense of Divorce, © 1998, by Carol Ann Wilson, Judith Briles, & Edwin Schilling





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