Property And Asset Division Essay Example for Free

Property And Asset Division Essay ABSTRACT This paper intends to set a simple structure in order to investigate the role of property and asset rights in the case of a legal separation. This paper also lays stress upon the role that the laws of alimony and property division can play in formulating the divorce decisions and allocations of assets even in the case of a existing marriage. INTRODUCTION it is commonly believed that certain changes within the Divorce Laws and regulations have led to the increasing number of divorces occurring today, especially when the Law allows one partner to unilaterally ask for a matrimonial dissolution lacking the approval of the other partner. People also felt that a continued liberalization of the Divorce laws would further increase the divorce rate. However, this is not true. The laws on property division, both within a marriage and after divorce also play a very important part in the filing of a divorce. Moreover, the continuously simplifying procedures and easily available legal aid is also the factor behind the increasing number of divorce incidents. This paper throws light upon the general property rights that are involved within a legal separation.   The Divorce Laws presents some rights with regards to the dissolution of a marriage, and these are related to the property rights of both the partners. At times, such rights can me traded or at times can also be included within the dissolution agreement. For instance, a Law that allows one partner to take a divorce, is very different from the one the Law that needs the consent of both the partners. If the husband wishes to separate his ways, and if his profit from the divorce is more, then according to a Mutual Consent, both the partners agree to divorce and the husband has to pay the compensation to his wife. In this case, it is said that the wife has sold her marriage rights. Whereas, in the case of a one sided law, if the gain of the husband is small than the loss of the wife, then the wife needs to compensate the husband for not asking for a separation. In this case, it is said that the husband has sold his marriage rights. The conclusion of this discussion is that the split-up does not depends on the law, but on the comparative size of the gains and losses of divorce. This argument given above allows for the evolvements of property rights in a divorce. Thus property and assets once mutually held by both the couple, become a type of compensation which can be paid. The property laws assume that in the absence of any type of compensation that has been mutually formed, or any agreed transfer, there is a well laid out criterion for the allocation of property and resources held jointly. After the divorce has been granted by the court, it depends upon the couple to divide the property. This can be done even of one partner seeks the division of the marital property. The couples are free to settle the property issues outside court if they wish to do so. To remember some important facts about Property Division law regarding a divorce, are that there are some kinds of properties that cannot be divided by the court. The properties that come under this ruling are inherited properties, gifts, business and professional licenses and property inherited by the partners before marriage is not subjected to a division. Also, it should be noted that there are certain matters that are upheld by the Property Division law that decide the division of property between the two parties. Monetary issues, contributions by each partner to the household, tax penalty in case of an imbalanced partition; labors of a partner to safeguard and augment the value of the joint property; efforts by a spouse to waste assets; the physical conditions and health of each partner, and the economic situation of each partner are some of the major issues that drive the format of the Property division in the case of a divorce.   The next section discusses the Property Rights and Family law. PROPERTY RIGHTS AND FAMILY LAW Marital or commonly referred to as community property is defined by different rules by different states, but overall, it includes the assets and property that were acquired jointly by the couple at the time of marriage and during the marriage. The wages that are earned by each of the couple, home, furniture, cars and other household items that are purchased during this period are marital property. Neither of the partner has the right to keep these things entirely without the consent of the other partner. If the property is in the name of one spouse, then it is also not necessary that it is not a marital property.   Similarly, a pension is also regarded as a marital property, even though it is gained in the name of only one spouse from his working place. In some cases, pensions may be regarded as non marital, seeing to the financial and health conditions of the spouse earning it. The money that was earned mutually is regarded as marital property while the money earned before marriage is non-marital. Division of Marital Property In some states, there are very simple rules regarding division of marital property. According to some marital laws, it is believed that marriages are a joint undertaking and that the marital property should be equally divided between the two spouses and it is assumed that both the spouses are an equal contributor to the acquirement and conservation of property. However, the court understands that the contributions may be of different nature, but in any case, they may be treated equally. The spouse who earns money will not receive more of property than the homemaker, unless the husband and wife had a premarital agreement stating otherwise. In some other countries and states, it is not a fifty-fifty situation. The Law considers a number of factors and gives each factor a weight age according to the situation. However, this gives more flexibility to the process of property and assets division. Any property or a physical asset may belong to both the partners or only one. In case, when the couple has a disagreement on a particular asset and how should it be used, then in this case, the current state law of martial issues hold the authority to decide the matter. These laws relating to division of marital property differs from one country to other, and keeps changing with time. There are examples of these property laws showing dramatic changes in the character of property rights within marriage over the course of a time period; where from having almost complete power over family unit property, a husband can now be disqualified from his own house. Comparable transformations have occurred in English law, leading to the Married Womens Property Act of 1870. Here are some factors stated in the Law for equitable distribution of assets and property. Here are some examples of factors that are considered by states applying principles of equitable distribution of property: Non-marital Property- if in case, one spouse inherits more non-marital property, then the other spouse can be in favor of getting a larger portion of the marital property upon division. As the Law, states, â€Å"courts are not obliged to give equal amounts of property to each spouse, but if the parties have sufficient assets to leave each party in a comfortable situation after the divorce, courts usually will try to do so.† Earning Power- The spouse with less earning power will be given more benefit during the property and other asset division by the court. Courts states that, â€Å" the party with greater earning power can regain money lost in a divorce more easily than the party with less earning power†. Who Earned the Property- in these cases, the benefit is gained by the spouse who worked hard to earn the property. For example, the family business which was run by the husband goes to him, only of the family property and the business is of almost same value. The home in this case goes to the wife. Services as a Homemaker- The court recognizes that ding the household chores are also work and in addition it gives freedom to the other spouse to go out and earn for the family. Law gives attention to the fact if a homemaker had impaired his or her professional career in order take care of the house hold. If the spouse can show that he or she had missed the opportunity of earning, then the court favors to giving more of the property to the home maker spouse. Waste and Dissipation- the court also analyzes the fact if any spouse has wasted money during the marriage and this can go against him or her during the property division time. . This issue us also called as economic fault, rarely considered by courts. According to the court, â€Å"Waste or dissipation could include gambling losses, significant sums of money given to family members (particularly over the protest of the other spouse), and money spent on pursuing romantic relationships outside the marriage.† Also added are the business losses which are considered as waste or dissipation, however at times they might be considered as normal business risks and the spouse is normally not penalized. Faults- Law also considers any type of spousal abuse or marital infidelity, when considering the case of marital property division. Most of the state courts however do not give much stress to this issue during property division. In the past, majority of the divorce cases were based upon faults by either of the partners, and the divorcà © was settled upon this fault by the spouse and highly affected the property division. However , today, courts decide the property division cases primarily on the economic factors when separating property and pay less concentration to who-did-what-to-whom. Duration of Marriage- in this case, if the marriages are long, then the court favors the spouse with less wealth or earning power. The longer the marriage, the more likely a court is to view the husband and wife as equal partners. Age and fitness of Parties- if one of the person is suffering from bad health or is much older than the other spouse, then he or she is in favor of getting a larger award. According to the court,† When the factor is mentioned by a court, it most often is in connection with an older wife whose ability to earn money is diminished by her age and health. The factor can apply to men too, particularly if the man is of an age at which it is not reasonable to assume that he can go out and re-earn a substantial amount of assets if his wife were given a majority of the marital assets. In such a case, an equal division of assets would be more likely†. Tax penalty- The tax consequences in the event of a marital property division is considered by the court. Suppose for example, if the house or the stocks acquired are being sold as a part of the property division, the person who ends up paying more tax as payment of capital gains tax, the Law will consider this and will try to favor the party during the division. On the contrary if the property settlements leads to some kind of tax benefit, the party which acquires a majority of the profits may be in a stringer position to receive a less part of the property. Premarital Agreements. A printed premarital agreement, can be a winning card in dividing the marital property between the partners. By ingoing into a premarital accord, the wife and husband have decided to surrender their rights to have a court consider the customary group of factors in dividing property. As a substitute, the parties through their contract have determined in advance how their property should be divided in the event of a divorce. Custody of Children – this issue might fall under a very narrow spectrum of property rights if viewed closely, since the assets and property has to be later devoted for the cause of children, therefore, responsibility of children and their custody is also a part of this issue. As an example, in England, before the Child Custody Act of 1839 a wife, even if divorced and separated from her husband, was offered no custody or visiting rights to her children and other family members. Ever since, the laws have changed significantly. Effect of bankruptcy – the settlements of marital assets and property might be dischargeable in liquidation or bankruptcy, or in case, it might not be dischargeable, depending on the essentials of the divorce case. A discharge in bankruptcy means, â€Å"all of a debt or a portion of a debt no longer has to be paid because a federal court has declared the debtor to be bankrupt†. Before 1994, many former spouses found themselves out of luck after the divorce when seeking to collect what was due, because their former spouses declared themselves bankrupt after divorce. For example, a couple, may have agreed to a divorce based on a promise from the husband that three years after the divorce, he would pay the wife some mutually agreed amount of money as part of the property settlement. If the husband declared bankruptcy after the divorce was finalized, the wife might never be able to get the said money. This arrangement, particularly in cases in which the debtor is technically bankrupt (owing more money than the debtor has assets) was seen as a potential unfairness by the Congress, as the debtor has the capacity to pay the debts to the ex-spouse. The law was then modified, the new law, which took effect in 1994, started allowing the bankruptcy court to weigh the situation between the parties. If there are reasons to believe that the so called bankrupt debtor has enough means, property and income to pay the debt to the ex-spouse, in addition to his or her dependents’ basic support then the debtor is bound to pay the debt to ex-spouse. If it is found or proved that the debtor truly does not have enough money for the basic support of the debtor and his or her dependents, then all or a part of the debt may be discharged in bankruptcy. Although in appropriate circumstances, a bankruptcy court has the power to discharge, partially or fully, a debt owed in a property settlement, the court cannot discharge past-due payments for alimony or child support. For reducing future alimony and child support, a debtors bankruptcy may be a ground, but it certainly does not qualify for discharging part or full past-due alimony and child support. CONCLUSION The marital community may end in several ways- annulment, death of spouse, divorce, separate maintenance and separate living agreement. In all these cases, however, the above mentioned laws are useful for resolving the property division issues. REFERENCES 1. Becker, Gary (1991) A Treatise on the Family , Cambridge, Harvard University Press. Becker, Gary, Landes, Elizabeth, and Michael, Robert (1977), An Economic Analysis of Ma rital Instability, Journal of Political Economy, 85(6), 1141-1187. Clark, S. (1998). Law, Property, and Marital Dissolution. University of Edinburgh, Department of Economics, Discussion Paper. Clark, S. (1999). Law, Property, And Marital Dissolution. Economic Journal ,, forthcoming. Coase, R.H. (1960). The Problem of Social Cost, Journal of Law and Economics, (3) , 1-44 Friedberg, Laura (1998). Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data, American Economic Review, 88(3), 608- 627. 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