Aug. 29, 2017
State law on property division at divorce is essentially a recharacterization of the property held separately or jointly by the couple using community property concepts. As such, regardless of how property is titled, property earned during the marriage is considered to be "marital property"; and property that a spouse held at the time of marriage or acquired during marriage by gift or inheritance is that spouse's "separate property." States differ on whether the income from or the appreciation of separate property during the marriage is marital property. Ohio, for example, does not gross-up marital property with the income from or the appreciation on separate property or otherwise compensate the non-owning spouse, unless the personal efforts of the non-owning spouse were involved. Ohio Rev. Code § 3105.171(A)(3)(a) and (A)(6)(a).
In general, absent equities to the contrary, (1) marital property is divided equally between the parties, and (2) separate property is not subject to division. E.g. Ohio Rev. Code § 3105.171(B), (C) and (D). In a small minority of states, such as Indiana, all property of either spouse is subject to division. Ind. Code § 31-15-7-4. In the majority of states that respect the distinction between marital and separate property, the court is generally free to apply equitable principles in considering separate property when dividing up marital property or even awarding part of a spouse's separate property to the other spouse.
The same is true in Ohio. An award from separate property is referred to as a "distributive award". Ohio Rev. Code § 3105.171(A)(1) and (F). The factors that a court is to consider under Ohio law are as follows: "(1) The duration of the marriage; (2) The assets and liabilities of the spouses; (3) The desirability of awarding the family home, or the right to reside in the family home for reasonable periods of time, to the spouse with custody of the children of the marriage; (4) The liquidity of the property to be distributed; (5) The economic desirability of retaining intact an asset or an interest in an asset; (6) The tax consequences of the property division upon the respective awards to be made to each spouse; (7) The costs of sale, if it is necessary that an asset be sold to effectuate an equitable distribution of property; (8) Any division or disbursement of property made in a separation agreement that was voluntarily entered into by the spouses; (9) Any retirement benefits of the spouses, excluding the social security benefits of a spouse except as may be relevant for purposes of dividing a public pension; (10) Any other factor that the court expressly finds to be relevant and equitable." Id. at (F)(1)-(10).
An award of support to one spouse (also known as maintenance or alimony) is a different issue than property division. A support award will be determined after the division of marital and separate property has been made. The court will award support to a spouse, payable from the income or property of the other spouse, if justice so requires. In determining the need for and the amount of support, the court is typically instructed by statute to consider a variety of factors. These include the standard of living established during the marriage, the income of the parties from all sources, the present and future earnings capacity of each party, the education of the parties, and the duration of the marriage. E.g., Ohio Rev. Code § 3105.18.
States differ on the validity and effect of pre- and post-nuptial agreements as affecting property division and support. From the above discussion, we can appreciate that what is considered "property" is important in the context of property division. Furthermore, at least under Ohio law, the income from all sources is considered when an award of support is made. These concepts lead us to a discussion of beneficial interests in trusts as property and the income derived from such interests.