Your divorce case will resolve a number of financial issues. These are in addition to child support and financial issues involving your children. In particular, your final divorce order will:
- Divide your financial assets, including pension plans, retirement accounts, and deferred compensation plans
- Determine which of you will pay which debts that you and your spouse have, whether individually or as a couple
- Divide your real and personal property
- Determine whether any spousal support (alimony) will be required
You will need to understand your own finances in going through a divorce. And you will need to understand how the court will approach the financial issues if you and your spouse cannot agree.
If you are able to reach an agreement on the property issues, you can file a Final Stipulation about property matters with the court.
What Property Can the Court Divide?
In Vermont, the courts will divide all marital property at the time of your divorce. Virtually all property you own is marital property. This includes the following:
- Your home
- Other real estate
- Bank accounts
- Investment accounts
- Personal possessions
- Pension plans and retirement accounts (these are discussed in the next section)
The property is considered marital property whether you own it jointly or one of you owns it individually. Marital property can include property that
- you acquired during the marriage from your earnings during the marriage,
- you brought into the marriage,
- you inherited during the marriage,
- you received as a gift during the marriage, or
- is titled solely to you or listed only in your name.
Who Decides How the Property Should Be Divided?
The court will divide all of your marital property equitably (this is another word for fairly). Because you and your spouse are in the best position to decide what is fair, you should make every attempt to agree on how to divide your property.
If you can't agree on your own, or with the help of the case manager, you should consider mediation. Mediation is a process that helps people communicate and negotiate with each other. The Vermont Superior Court Family Mediation Program provides a subsidy to eligible parties in certain cases. Even if you are not eligible for the reduced fee, you and your spouse should consider hiring a mediator to help you reach an agreement.
If you leave the decision to the judge, the judge will try to divide the property fairly.
Although you may not be able to agree on everything, you should try to agree on how to divide your personal possessions. These might include vehicles, furniture, photos, kitchenware, furniture, appliances, and small electronics.
Sometimes when people can’t agree on how to divide their possessions, they make a list and take turns picking from the list. This may not work with more substantial assets such as bank accounts and retirement accounts.
Any partial agreements you can make about dividing your property will help you and the court focus on the things you don’t agree about. That will make any contested hearing go more smoothly.
Keep in mind that the property division cannot be changed after the divorce is final. This means that once your divorce is granted, you cannot ask the court to modify your property division (unless fraud or other unusual circumstances are discovered).
How Does the Court Decide How the Property Should Be Divided?
The court will divide your property equitably, but that does not necessarily mean a 50/50 split. The court, by law, has to look at these factors when dividing property:
- The length of the marriage
- The age and health of the parties
- The job, source and amount of income of each of the parties
- The vocational skills and employability of each spouse
- The contribution by one spouse to the education, training, or increased earning power of the other
- The value of all property interests, liabilities, and needs of each party
- Whether the property settlement is to be awarded instead of, or in addition to, spousal maintenance
- The opportunity of each party to get capital assets, income, or inheritance in the future
- The desirability of awarding the family home or the right to live there for a reasonable period to the spouse having custody of the children
- The party through whom the property was acquired
- The contribution of each spouse in the acquisition, preservation, and depreciation or appreciation in value of the respective estates, including the nonmonetary contribution of a spouse as a homemaker
- The respective merits of the parties (for instance, whether either party was abusive, committed adultery, or was an alcoholic)
The importance placed on each of these factors depends on the individual case. The judge does not have to place equal weight on each factor.
How to Prepare for a Contested Hearing on Property Division
If you and your spouse cannot agree on how to divide all of your property, you may still agree on how to divide some of it. You should put that agreement in writing and file it with the court before the final hearing.
Then you should make a list of all of the property you don’t agree on. The court will want to know the value of each item.
You and your spouse should try to come up with agreed values for as many of the contested items as you can. People often use online rating sites to estimate the value of their cars. Sometimes you can figure out how much an item is worth by talking to a local expert or looking at similar used items online. Write down any values you both agree on and file that list with the court before or at your final hearing. The more you can agree to before the final hearing, the more smoothly it will go.
If you own real property (such as a house or land), you should try to agree on its value. If you can't agree on the market value of your real property, you may want to share the cost of hiring a neutral appraiser. If you can't agree to that, you may want to hire your own appraiser. Share a copy of the appraisal with your spouse before the hearing, and bring the appraiser as a witness to the hearing. You can also hire other experts to estimate the value of your most valuable assets.
At the hearing, be mindful of the factors the court must consider when dividing property (see the preceding list). For example, you may want to emphasize the length of the marriage, how much money you brought into the marriage, or the fact that you inherited money during the marriage. You should consider and address as many of the factors as you can.
You should bring documentation to court that shows the value of your property as well as your debts, such as the following:
- Your house appraisal
- A statement showing your current mortgage balance
- Bank statements
- Account statements from investment or retirement accounts
- Information about your pension benefit
- Credit card statements
- Evidence of other debts
You must bring copies of any documents you file with the court to give to the other party or lawyer.
One of the biggest assets for many people is their pension plan or retirement account through work. It may be a defined benefit plan or a defined contribution plan. A defined benefit plan is a traditional pension plan. It pays a certain amount per month for the rest of your life after retirement. You may choose a lower monthly benefit and name a survivor to receive continued benefits after you die. A defined contribution plan is an account that you and often your employer contribute to throughout your working life. When you retire, you can draw from that account; 401(k) and 403(b) plans are defined contribution plans.
Well before the final hearing, you and your spouse should try to agree about what to do with your retirement benefits. You cannot change your property division after a final order except under exceptional circumstances. For that reason, you need to resolve any issues concerning retirement plans in the final order.
In some cases you and your spouse may be able to divide your assets without dividing your pension plan or retirement account. For example, if you both have retirement accounts and they are similar in value, and you split the proceeds from selling your home, you may not need to divide your retirement accounts. You just need to make sure that your agreement, and the court's order, says that you are each keeping your own benefits without any claim by the other.
In other cases dividing your retirement account or pension plan may be the best way for you and your spouse to divide your property fairly. For example, if only one of you has a retirement benefit, and it is the only significant asset of the marriage, you may need to divide that in order to treat both parties fairly. In that case, it is strongly recommended that you consult with an attorney about a Qualified Domestic Relations Order. This is often called a QDRO (pronounced “kwa-dro”).
A QDRO is a court order that creates or recognizes the right of another person to retirement money held in a deferred compensation plan, pension plan, or 401K plan. It can divide an account, such as a 401(k), between you and your spouse. Or it can divide your monthly benefit if you have a defined benefit plan.
Under federal tax and pension law, you cannot assign part of your retirement benefits without a QDRO. Without a QDRO, if you make early withdrawals from your retirement account to pay your spouse, you will have to pay significant taxes and penalties. And without a QDRO, your ex-spouse may not have any right to any share of your retirement benefits.
An order can only be considered a QDRO once a judge signs it. An agreement between you and your spouse is not enough. The judge will usually sign the QDRO order at the final hearing.
QDROs must follow federal laws. Most retirement plans also have their own requirements and limitations. You will need to contact the administrator of the pension to find out about these requirements. The QDRO must follow the procedure and requirements of your own retirement plan. Most plans have sample forms for you to follow, called a model order.You must follow these forms exactly. If the order is not prepared correctly, the plan may not qualify, and you may not be able to collect your part of the pension.
Because QDROs can be very complicated, we strongly recommend that you talk to a lawyer. Even if you do not hire a lawyer to represent you in the rest of your case, consider hiring one to draft the QDRO for you. This is especially important if you have a defined benefit plan. These kinds of QDROs can be the most complicated.
The QDRO should list the names, addresses, and social security numbers of the payees. It must also contain the names of the retirement plans involved and the account numbers of the parties. A QDRO can include more than one pension plan or retirement account.
If you have a defined contribution plan, such as a 401(k), decide with your spouse how to divide the amount in the account. If you have a defined contribution pension, you will need to decide when the payments begin, whether to elect a survivorship option, and what happens if you die first.
If the court signs a QDRO, you will need to serve it on the plan administrator. You are responsible for serving the QDRO on the plan administrator, and for responding to any follow-up. The court will not take any steps to make sure you have done this. You should do this right away.
You can find more information about QDROs from the U.S. Department of Labor.
You and your spouse will need to divide your debts as well as your property. In some cases, determining who is responsible for the parties' debts is the biggest issue in the divorce. You should make a list of all of your debt, whether in both of your names or in individual names. Try to divide these fairly. In deciding what is fair, consider how you are dividing your assets. You should also consider the factors the court will consider in dividing your property (select Dividing your Property here).
Your car can be repossessed or your home can be lost through bank foreclosure if you don't make a responsible and timely plan for paying off your debts. Unpaid debts could result in both of you having bad credit reports and losing future credit. So it is important for you and your spouse to make a plan for paying your debts as soon as you can.
Responsibility for Paying Debts
Even if you agree to divide debts a certain way, you may still be legally responsible to the creditor for a debt that was assigned to your spouse. Many couples have jointly held debt, such as a bank loans, credit cards, medical bills, and utility bills. Even if your spouse agrees to take on some of these debts, if it is a joint debt, the creditor can try to collect from either one of you. That's also true if the court orders your spouse to pay one or more of your joint debts. Your divorce does not free you from joint debts. If you have to pay one of these debts, you may have a claim against your spouse.
One way to protect yourself is to refinance loans so that only one spouse is liable on the debt. If you cannot refinance a debt, you should create a detailed agreement about who will pay the debt. Address in detail who is responsible for paying the debt, including any interest, the amounts to be repaid, and over what periods of time.
Creditors cannot collect from you for the individual debts of your spouse. This might include debt on credit cards solely in your spouse's name, or loans your spouse took out alone.
Talk to a lawyer if you are unsure about how to protect your financial interests.
Protecting Your Home
As part of a temporary order, the judge may order one spouse to make the mortgage payments. If that spouse fails to pay, the mortgage holder may start foreclosure proceedings against you. That's true even if you were not living in the home and were not responsible to pay under the temporary order. Consult with a lawyer immediately if a foreclosure proceeding is started against you. A knowledgeable and timely response may keep you from losing your home.
If you are unable to pay your debts, you may be excused from paying them. To find out whether you meet the conditions, you can file a petition for bankruptcy. A bankruptcy petition is filed in the United States Bankruptcy Court for the District of Vermont.
An order of the Bankruptcy Court may affect your property rights in a divorce. For example, if the family division orders your spouse to pay a joint debt, the Bankruptcy Court may still excuse your spouse from paying that debt. If that happens, the creditor still has the option of trying to collect payments from you. That's true regardless of what your divorce order says. Or, the Bankruptcy Court can discharge, or cancel, an order requiring one spouse to pay the other spouse as part of the property division. If the Bankruptcy Court looks at the property award as a debt. It can discharge the debt.
Filing for bankruptcy does not change the child support that has already been ordered by the family division. Filing for bankruptcy also does not generally change spousal maintenance obligations.
Once a bankruptcy petition is filed with the Bankruptcy Court, Vermont state courts cannot make any new orders involving the parties' finances. The family division can enforce existing support orders, but it can't change child support or spousal maintenance payments without the Bankruptcy Court's permission while the bankruptcy case is proceeding.
If your spouse files for bankruptcy after a final order, you may still request that the Bankruptcy Court not discharge your property settlement. This must be done within 60 days of the meeting of creditors. You should talk to a lawyer.
Consult a bankruptcy lawyer if you think there is a chance that your spouse will file for bankruptcy while there are outstanding property and support obligations in a divorce. You can find more information about bankruptcy at Vermont Law Help. Vermont Law Help may also be able to help you find legal help. You can also call them at 1-800-889-2047.
Spousal maintenance is the payment of ongoing financial support by one spouse to the other. Spousal maintenance is designed to ease the hardship that the divorce may cause a financially dependent spouse.
The Right to Receive Spousal Maintenance
The court may order you to pay spousal maintenance if your spouse
- does not have enough income, property, or both, to support their reasonable needs, and
- is unable to support themselves by working or is the custodian of your child.
Reasonable needs are measured by your shared standard of living during the marriage.
The court may order compensatory (long-term) maintenance, or “rehabilitative maintenance” (short-term). The court decides whether to award spousal maintenance, which kind to award, and how much to award based on the facts of each case.
For example, your spouse may have been away from the job market for a while, or may need more education or training to become self-sufficient. In that case the court may order you to pay short-term spousal maintenance to give your spouse time to finish additional training or education.
Long-term spousal maintenance may be appropriate if:
- There is a significant difference between the incomes of the spouses.
- There has been a long marriage during which the dependent spouse was a homemaker.
- The spouse will never be able to earn enough to live in the lifestyle established during the marriage.
For example, you might not have worked during the marriage and have a limited earning capacity compared to your spouse and need permanent spousal maintenance.
If the court does not order any spousal maintenance at the time of the divorce, you can't ask for it after the divorce is final. If the court orders spousal maintenance in its final order, it may later change the amount or duration if circumstances change. You can find more information about modifying spousal maintenance orders here.
How the Court Decides the Amount and Length of Time of Spousal Maintenance
The court makes decisions about spousal maintenance based on the following:
- The income and property available to the spouse who is asking for maintenance (including property awarded to that spouse)
- The spouse's ability to meet their needs (including whether the child support order includes any sum for the spouse, such as a housing allowance)
- The time and money the spouse will need to get the education or training needed to find appropriate work
- The standard of living during the marriage
- The length of the marriage
- The age and the physical and emotional condition of each spouse
- The ability of the paying spouse to meet their reasonable needs while also meeting the needs of the other spouse
- Adjustments for inflation
Maintenance May Not Stop Upon Remarriage
Sometimes a court will order that you can stop paying spousal maintenance if your ex-spouse remarries. But courts do not always do that, because the remarriage may not result in more financial security.
If the court's spousal maintenance order does not address remarriage, the court may refuse to change the order after your ex-spouse remarries. If your ex-spouse's remarriage improves their financial situation, the court may agree to change the maintenance order.
In some cases, a court orders maintenance as repayment for the contributions made to the marriage partnership. This may include things such as working to support the other spouse's schooling. In those circumstances remarriage may not affect the spousal maintenance payment.
Modification of Maintenance After Divorce
The court can change a final spousal maintenance order only if there is a real, substantial, and unanticipated change of circumstances. For example, if the paying spouse becomes disabled, the court may change the maintenance order. Small changes, or changes that were expected, are not sufficient for the court to change the order. You can find more information about enforcing and modifying spousal maintenance orders here.