6.3 Division of Property—equitable Distribution

• Library: The Virginia Lawyer: A Deskbook for Practitioners (Virginia CLE) (2022 Ed.)

6.3 DIVISION OF PROPERTY—EQUITABLE DISTRIBUTION

6.301 General Principles of Equitable Distribution.

Section 20-107.3 of the Virginia Code governs the division of property interests of spouses in a divorce. Section 20-107.3 is an "equitable distribution" statute, and it recognizes marriage as a partnership and provides a means to equitably divide the wealth accumulated during a marriage. ³⁵⁸⁴ However, there is no presumption of an equal division. ³⁵⁸⁵

Once the trial court has determined the grounds of divorce, the next step is the process to determine equitable distribution. Equitable distribution involves a three-step process. ³⁵⁸⁶ The court first must classify the property as either separate, marital, or part separate and part marital (hybrid) property. The court then must assign a value to the property based upon evidence presented by both parties. Finally, the court distributes the property to the parties, taking into consideration the factors presented in section 20-107.3(E). ³⁵⁸⁷ Once the first three steps of the process are completed, the court will apply the statutory factors in section 20-107.3(E) to each asset to ultimately make its equitable distribution decision. Both parties have rights and interests in the marital property, which are only to be used as a consideration in determining a monetary award, if any, as provided for in section 20-107.3. ³⁵⁸⁸

Divorce litigants have the burden to present evidence sufficient for the court to make an equitable distribution award. If a litigant who has the burden of proof on any given issue does not present sufficient evidence, he or she will not prevail on that issue. ³⁵⁸⁹

There are no special rules for pleading factual allegations concerning equitable distribution. It is sufficient to say in the complaint for the divorce that the parties have assets and debts that are subject to equitable distribution.

The circuit court can retain jurisdiction of equitable distribution following the entry of a final decree of divorce if the court determines that retention of jurisdiction is clearly necessary. However, a motion for this relief is required. ³⁵⁹⁰

6.302 Foreign Divorces.

Equitable distribution can also be awarded when a final order of divorce has been awarded in a foreign jurisdiction if (i) one of the parties was domiciled in Virginia at the time the foreign proceedings were commenced, (ii) the foreign jurisdiction did not have personal jurisdiction over the Virginia domiciliary, (iii) the request for equitable distribution in Virginia is initiated within two years of the receipt of notice of the foreign decree by the Virginia domiciliary, and (iv) the Virginia court obtains personal jurisdiction over the parties pursuant to subdivision A(9) of Section 8.01-328.1, or in any other manner permitted by law. ³⁵⁹¹

6.303 Identification of the Assets.

Before any settlement or trial of a divorce case, all of the parties' assets must be identified. This can be a difficult aspect of a divorce case. Clients, whether intentionally or unintentionally, do not always identify all of their assets. Therefore, it is extremely important to take advantage of all discovery methods to discover all omitted assets so they can be included in the division of property. Providing checklists for clients to use in developing this information is recommended. This is also the area where formal discovery is crucial.

6.304 Legal Title and Ownership of Assets.

The first step under section 20-107.3(A) is to determine the legal title and ownership of the parties' assets. This part of an equitable distribution analysis falls directly in line with the identification of the parties' assets. All assets, regardless of any arguments that may be made regarding the classification of the assets, must initially be identified in the divorce. This includes but is not limited to real property; business interests; personal property, including but not limited to furnishings, art, and collections of any type; automobiles and other types of vehicles; bank accounts; financial investment accounts; individual retirement accounts; annuities; retirement plans whether qualified or nonqualified; stock options; any type of deferred compensation; and personal injury or workers' compensation awards. Depending on the type of asset involved, proof of legal title and ownership must be introduced into evidence. To be admissible as evidence, these documents must be either authenticated or stipulated to before trial. In addition to introducing evidence concerning the legal title and ownership of an asset, counsel should prepare an Excel-type summary sheet of these assets to assist the court in making its equitable distribution ruling. In some jurisdictions, domestic relations pretrial orders require that a list of exhibits, as well as copies of the exhibits, be submitted to other counsel a certain number of days before trial. If the exhibits are not objected to within a designated period, they are admissible. This procedure eliminates much of the need to authenticate exhibits.

6.305 Valuation of the Assets.

The next step under section 20-107.3(A) is to value the parties' assets.

A. Determining the Value of an Asset.

The basic rule for valuing the parties' assets, with the exception of retirement plan assets, personal injury awards, and workers' compensation awards, is found in section 20-107.3(A) of the Virginia Code. The court determines the value of the property as of the date of the evidentiary hearing. Therefore, the evidence presented at trial must be the most current and accurate information. ³⁵⁹² The burden is on the parties to provide the court with sufficient evidence to establish the value of their assets, which cannot be based on guesswork. ³⁵⁹³

In Howell v. Howell, ³⁵⁹⁴ however, the Virginia Court of Appeals noted that value is not defined in section 20-107.3:

Code § 20-107.3(A) directs that the trial court value all property of the parties, but it does not define the term, "value," for equitable distribution purposes. The statute does not set the standard of value, that is, the measure of a property's worth for equitable distribution. "Value" is a mercurial term; the term has numerous, distinct meanings. The various meanings are not interchangeable. The meaning of the term, "value," depends on what is being valued, who is interested, and why it is being valued. A piece of property may have different values for different purposes. The purpose for which it is being valued determines which definition, which standard of value, is proper. Purpose determines the standard of value; that, in turn, determines the appropriate methods of valuation. ³⁵⁹⁵

The method used to determine value will depend on the asset, for example, real estate appraisals for real property, NADA values for vehicles, ³⁵⁹⁶ appraisals for personal property, and business valuations. Therefore, counsel should use care in selecting experts to establish the value of an asset.

B. Using an Alternate Valuation Date.

If the value of an asset has changed before the evidentiary hearing, section 20-107.3(A) does provide a remedy. A party can file a motion for a different valuation date no less than 21 days before the evidentiary hearing. The court may order a different valuation date if good cause is demonstrated and to attain the ends of justice. In Robbins v. Robbins, ³⁵⁹⁷ the Virginia Court of Appeals noted that if the increase or decrease in value did not occur because of either parties' efforts or fault, then neither party should disproportionately suffer the loss or benefit from the windfall. Accordingly, the trial court not only has the authority to revalue the property if a timely motion for a different valuation date is filed, but abuses its discretion by failing to do so. Depending on the particular condition of the economy at the time a case is brought, counsel should at least consider filing a motion for a different valuation date in almost every case.

C. Dissipation of Marital Assets.

A good example of the use of a motion for an alternate valuation date is the dissipation of marital assets in anticipation of separation or divorce. "Dissipation occurs 'where one spouse uses marital property for his own benefit and for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown.'" ³⁵⁹⁸ The Virginia Court of Appeals has made it clear that if the parties use marital assets "for living expenses or some other proper purpose," ³⁵⁹⁹ this will not be considered dissipation. In Wright v. Wright, ³⁶⁰⁰ the Virginia Court of Appeals approved the expenditure of approximately $900,000 of marital funds by a wealthy attorney. As a result of this decision, the Virginia General Assembly enacted section 20-103(A1) of the Virginia Code to require that awards made by the court pending litigation be paid from post-separation income of the obligor unless the court orders otherwise. There are also situations where the value of the property has either decreased or increased during the time between the evidentiary hearing, and the time a case is ultimately decided, such that a motion to reopen the hearing to take further evidence of value would be appropriate. ³⁶⁰¹

D. Valuing Assets with No Value.

A question that commonly arises is what happens when the court is confronted with assets that have no value, for example, when the marital residence is underwater. The answer is found in Hodges v. Hodges. ³⁶⁰² In Hodges, the Virginia Court of Appeals noted that

Code § 20-107.3(D) requires that the monetary award be "based upon the equities and the rights and interest of each party in the marital property." (emphasis added). Where the marital property is encumbered with indebtedness which equals or exceeds its value, then for purposes of a monetary award it is essentially of no value. Without value, there is no basis for a monetary award. ³⁶⁰³

However, if clients assert that an asset has no value, sufficient evidence of any...