Dividing debt during divorce is often just as important as dividing assets and property. After all, being saddled with debt can make it extremely difficult to start your new life, particularly if you and your ex-spouse have accumulated large amount of debt.

If you are considering divorce and are worried about the debt you may have to shoulder, Thomas Family Law is here to answer your questions. Since we focus solely on family law, we have a deep understanding of every aspect of divorce, including debt division. We will explain your rights and help make sure the court considers all relevant factors when coming to a fair and reasonable decision.

With attorneys licensed in both Tennessee and Mississippi, we help clients navigate the difficult process of divorce throughout the Memphis area and North Mississippi.

HOW IS DEBT HANDLED DURING DIVORCE?

Generally, courts consider all debt accumulated during marriage as marital debt ― meaning, just like marital assets and property, it is subject to division between you and your spouse. One important thing to remember is that the name on the debt is not the determining factor when the court decides which spouse will have to pay it.

In many cases, the spouse who is best able to repay the debt will have to shoulder the burden, although the court will also examine many other factors, including who actually incurred the debt and why. Also, debt accumulated and secured by a specific property ― such as a car loan ― will often go to the spouse who receives that property in the divorce.

Lastly, any spouse who accumulates debt after separation, but before the divorce is finalized, will usually be responsible for paying it.

During a Tennessee divorce, courts are typically only able to divide marital property between soon-to-be exes, i.e., property acquired by either spouse during marriage. However, Tennessee law considers an inheritance as separate property, meaning it belongs only to the inheriting spouse, regardless of when he or she received it.

It is important to point out, however, that just because an inheritance starts out as separate property does not mean your actions cannot transform it into marital property. For instance, if you inherit a significant amount of money, and you decide to commingle this money in a joint bank account with your spouse or spend it on fixing up a jointly owned home, a court may no longer consider the entire inheritance as separate property.

Alternatively, if you go to great lengths to make sure your inheritance maintains its status as separate property, the court may award you fewer assets during divorce, especially since one factor courts consider when dividing marital property is the amount of separate property owned by either spouse.

At Thomas Family Law, we are well-aware of the various factors that may impact your inheritance during a Tennessee divorce. Whether you wish to protect your inheritance or, conversely, are concerned that your actions have already put your inheritance at risk, our attorneys can help explain your rights and legal options.

OTHER TYPES OF SEPARATE PROPERTY

Importantly, there are many other types of separate property besides inheritances ― and all of them are protected from division upon divorce. These often include:

• Property owned by either spouse before getting married, including real estate and personal property

• Appreciation of, and income derived from, property owned by either spouse before marriage

• Gifts

• Property acquired after marriage, but obtained in exchange for property owned before marriage

If you have questions about divorce and its effect on your property, including your inheritance, a divorce attorney from Thomas Family Law, is here to provide you with answers.

Dividing property in a divorce is more complex than it may seem. First, careful study and research are necessary to be sure that all property is accounted for. This can be accomplished informally, either by exchanging information through voluntary disclosures and corroborating sources, or after aggressive, thorough, formal discovery investigating sources and uses of assets. Next, property must be categorized as either marital or non-marital. Generally, property acquired during the marriage is presumptively marital property, while non-marital property includes property owned by a party prior to marriage. However, property acquired during marriage may be non-marital if it was acquired in exchange for property owned prior to marriage or was acquired by a party as a gift or an inheritance.

Separating marital from non-marital property is very important to the parties going through a divorce because a court may equitably divide between the parties only the marital property. Non-marital property may be given only to the party who owns it. For these reasons it is important to have a Memphis family law attorney with the skills to distinguish between non-marital and marital property. During marriage, people frequently take actions that cause non-marital property to be transmuted into marital property. It is not unusual for an attorney to trace transactions that occurred during the marriage that could change the character of property from non-marital to marital or the reverse.

Once the property is properly categorized, it must be valued. Many assets are simple to value. For example, bank and brokerage accounts, holdings of publicly traded securities, 401(k) and 403(b) accounts, and IRAs usually can be currently valued using only copies of recent statements. The value of a marital home or other real estate is more complicated and generally needs an appraiser if the parties do not otherwise agree. Closely held business interests and private investments are even more difficult to value and often need valuation experts to help determine value. If parties have valuable art, antiques, coin collections, gold, vehicles, watercraft, or aircraft, valuation experts must be employed unless the parties are able to agree to values.

It is important to know the value of each asset because in making a division of marital property, assets may be set off against each other to achieve the equitable division. For example, it is unlikely the court would give one party an actual ownership interest in the other party’s small business; instead the court, once it knows the value of the business, would usually award it to the owning party and then, if there is to be a 50/50 split of assets between the parties, give the other party offsetting assets to equal the value of the business. Setoffs can include cash, real estate, or any other asset owned by the parties that has been categorized as marital.

Whether assets are divided in kind or with offsetting transfers, the court attempts to create an “equitable division,” which is not necessarily an equal division. There are a number of factors courts consider in making a property division, including contributions by the parties, the length of the marriage, the age and health of the parties, the non-marital property assigned to either party, whether the division is in lieu of maintenance, and the parties’ respective abilities to acquire additional assets after divorce. Tennessee courts do not examine fault as a factor in determining property division. However, Tennessee courts do consider fault when determining alimony awards. Mississippi, on the other hand, is in a minority of states in which marital misconduct is a factor for consideration in property division.” Deborah H. Bell, Bell on Mississippi Family Law § 6.08[2][e], 176 (2d ed. 2011). Economic waste may be a factor considered; however, marital misconduct, whether adultery, physical cruelty, mental cruelty, desertion or the like are not considered in reaching an equitable division under Tennessee law.

Thomas Family Law’s Memphis-area divorce attorneys regularly deal with complex financial cases and are well qualified to find, categorize, value and achieve the best property divisions for our clients.

If you are dealing with divorce, you need to make sure you understand the law when it comes to the distribution of retirement accounts, especially since these accounts are often a couple's largest assets.

At Thomas Family Law, we understand how important retirement accounts are to your financial future, and we will do everything we can to help you seek the benefits you may be entitled to during divorce. We will carefully explain your options, including the legal and tax consequences of each, so you can make an informed legal decision.

You and your spouse may have spent years preparing for retirement, so let us help you get your fair share if the two of you decide to divorce.

RETIREMENT ACCOUNT DIVISION

As with all other asset division during divorce, retirement accounts are subject to equitable division if you and your spouse decide to split. In fact, regardless of whether only one spouse has contributed to the retirement accounts over the years, they are still eligible for division if they were earned or accrued while the two of you were married, thus making them marital property.

Retirement accounts that may be subject to division upon divorce include:

• 401(k)s

• Pensions

• IRA and Roth IRA accounts

• Military pensions

Dividing retirement accounts is rarely an easy task. In many instances, the valuation process can be quite complex, not to mention you may also need a qualified domestic relations order (QDRO), which is essentially a court order that advises the administrator of a retirement plan on how to distribute the retirement funds to you and your ex-spouse. Oftentimes, it is best to seek experienced legal guidance if you have questions about retirement accounts and divorce.