Written by attorney Diane L Gruber

Divorce in Oregon; Dividing Assets & Debts -- Part 2

Last month we discussed the basics of dividing assets and debts in a simple divorce proceeding. This article deals with division of assets and debts when one or both parties have brought assets into the marriage.

In 1977 the Oregon Court of Appeals ruled that property division should disentangle the parties’ financial affairs and make them free from each other’s interference.

Oregon Statutes require the Court to consider a homemaker’s contribution to the marriage as a contribution to acquisition of marital assets. Thus, the family breadwinner does not leave the marriage with all the assets. Nor are the assets divided based upon each party’s income during the marriage.

In an often cited 1985 ruling, the Appeals Court found that the more intertwined the parties’ financial circumstances the more likely an equal distribution should be ordered even though a short-term relationship was involved and one spouse did not bring as many assets into the marriage.

The standard formula for property division in a divorce requires first placing a market value on each asset, including the present value of a pension plan. These values are added together, and the total debts are subtracted. Each spouse receives half of the value of the total assets.

In dividing the assets, some may need to be sold, so that each spouse leaves the marriage with half the value of the marital estate. The judge may order a certain property be sold and the proceeds used to pay off certain debts.

Another way to equalize property distribution is for one spouse to receive a money judgment wherein the other spouse will pay a sum of money plus interest in the future. Most such judgments require monthly payments to begin shortly after a judge signs the Judgment of Dissolution.

Oregon Statutes also provide a rebuttable presumption that both spouses have contributed equally to the acquisition of property during the marriage, whether such property is jointly or separately held. This presumption is satisfied if the party proves the asset was purchased during the marriage.

If a party has brought an asset into the marriage, that party will usually leave the marriage with that asset, or the original value of that asset, UNLESS it has been commingled with marital assets or with the spouse’s assets. Regardless, the spouse will share equally any increase in value of that asset during the marriage, including the other party’s pension plan.

Kate brought a house into her marriage with Jerry and she kept sole title. The couple lived in Jerry’s house during their marriage, while Kate’s house was rented out. The rental income Kate received was deposited into Kate’s bank account, and was never used for marital expenses. Kate paid repairs and expenses associated with the rental house out of these funds, and used most of the remaining funds on personal expenses.

When the couple divorced Kate retained the rental house, but she had to share with Jerry the house’s appreciation in value during their 10-year marriage.

During a four-year marriage, Lynn transferred a co-ownership interest to David in her pre-marriage residence, and the parties contributed substantial marital funds toward the improvement of this house. The Oregon Court of Appeals ruled that the parties have equal interest in the residence.

Lynn was awarded sole title of the house in the dissolution proceeding. However, the total value of the house was included as a marital asset and David received half of its value by receiving other marital assets.

When the divorce court awards an asset to one spouse, the court also orders that spouse to be responsible for any debt that is secured by that asset, such the mortgage or car loan. As discussed in last month’s column, if the other spouse is a joint debtor he is not off the hook with the creditor, unless and until the asset is refinanced.

Loans from relatives are treated by the divorce court as any other debt IF there is a written agreement AND the couple was making regular payments pursuant to the agreement. If not, the loan will be treated as a gift and will not be included as a debt when the couple’s assets and debts are divided by the Court.

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