Part 5: Division of Property, Assets, and Debts in an Oregon Divorce

How Will You Divide Your Property, Real Estate, Investments, & Debts?

Your divorce in Oregon will include the court’s review and division of all of your property and all of your debts, even those you have separate from your spouse. In a divorce in Oregon, the term “property” includes your home and all real estate, personal belongings, vehicles, funds in your bank accounts or trusts, investments, stock options, retirement benefits, pensions, and business interests.

Often, one of the most contentious phases of divorce can be the division of assets as dictated by Oregon law. Property can have both substantial emotional and financial value, whether it is your art collection or the business you inherited from your parents. Your property may need expert appraisal or to be sold; it is no longer solely under your control. It is vital to the property division process that you and your spouse are aware of the existence, nature and value of all marital and separate property. You should obtain advice from an Oregon divorce attorney about what property division is fair in your case, as division of assets may substantially change your lifestyle, job expectations and retirement plans.

In a divorce in Oregon, whether you divide your assets and debts according to a settlement, or you go to trial and have the court divide them for you, the process is the same:

  • Characterization of each asset and debt (as “marital” or “separate”);
  • Valuation of assets (determining how much each item of property is worth); and
  • Division of assets and debts (dividing the pool of property and debts between you and your spouse).

Because of the importance of property division and the fact that the property division cannot be changed after the divorce without proof of one party’s failure to disclose assets, it is vital to understand the relevant Oregon divorce laws.

The attorneys and staff at McKinley Irvin can help you face the challenges of the moment with an eye toward the future. Our experienced Portland divorce attorneys will provide counsel and prepare a strategy for your divorce in Oregon that protects you now and for your life after divorce.

Marital Property and Separate Property

The Oregon divorce court’s first task in property division is to determine the nature of your assets. Under Oregon divorce law, nearly all property accumulated during the course of a marriage is considered “marital” property. Some property, however, may be considered the “separate” property of just one spouse, especially if it was owned prior to the marriage, was inherited, was a gift, or is a personal injury settlement or judgment. If you and your spouse have substantial assets or complex ones (such as a business that must be valued), then your Oregon divorce attorney will likely suggest that you hire a business valuation expert or forensic accountant to determine the valuation and disposition of such property.

Valuation of Assets

Few spouses are able to agree on values for all of their property. Sometimes assets will be sold to determine their value. Sometimes the court will appoint a professional (paid for by the parties) to value the assets. More often, each spouse will hire an expert to prepare a valuation, and the court or mediator will decide values after reviewing the experts’ reports. The methods of valuation and the experts’ points of disagreement are often hotly litigated by each side. If you have substantial assets, it is essential that you hire not only a qualified Oregon divorce attorney with experience valuing complex assets, but also the best valuation experts for your case.

Division of Assets in an Oregon Divorce

HOW DOES THE COURT DIVIDE PROPERTY?

Oregon divorce law follows “equitable distribution,” which seeks fair, not always equal, division of property. While you and your spouse may determine the division of your property and debts in a settlement with the aid of your Oregon divorce attorneys, if you cannot come to an agreement, the Oregon divorce court will divide it for you. The court generally will not consider any marital “fault” when dividing your property.

In making its division of property, the Oregon divorce court may consider:

  • The cost of any sale of assets.
  • The amount of taxes and liens on the property.
  • The contribution of each spouse to the acquisition of the marital property, including the contribution of each spouse as homemaker.
  • Any retirement benefits, including social security, civil service, military and railroad retirement benefits.
  • Any life insurance coverage.
  • Whether the property award is instead of, or in addition to, spousal support.

In most cases of divorce in Oregon, the court will divide your total property evenly between you and your spouse. However, if one spouse can show that he/she contributed more to the acquisition of some of the marital property, then the court will divide your property in whatever way is found to be most just and proper.

WILL I KEEP MY SEPARATE PROPERTY?

Oregon divorce courts can divide even separate (non-marital) property as part of an overall division of property. It is unusual for a court to give separate property, such as assets acquired before the marriage, to the other spouse in a property division, but the court is allowed to do so under Oregon law if it is found to be just and proper in all the circumstances. This includes any vehicles, houses, real property, bank or retirement accounts that are listed in only one of your names.

Regardless of whether your property is owned jointly or separately, if it was acquired during your marriage, the Oregon divorce court will presume that you and your spouse contributed equally to its acquisition, unless shown otherwise. (This is true even if one spouse was a homemaker.) To show otherwise, you must prove that you and your spouse did not contribute equally to the acquisition of the marital property.

WHAT IF MY MARRIAGE WAS VERY SHORT?

When dividing the marital property from a “short-term” marriage, the Oregon divorce court most often seeks to return the spouses, as nearly as possible, to the financial position they would have held if no marriage had taken place. “Short-term” has no exact definition, but most often applies to marriages lasting less than two years. Usually a court focuses not on the exact length of your marriage, but instead on the extent to which you and your spouse have “commingled” your financial affairs.

WHAT DOES THE FINAL PROPERTY DIVISION LOOK LIKE?

The final division of property will include a list of assets that you will keep and a list that your spouse will keep, a list of debts that each of you will be assigned to pay, plus, where appropriate, a cash payment by one of you to the other and a list of any assets or debts to be kept jointly. In some cases, your Oregon divorce judgment may not divide all of your property, but instead give you rules about how to divide it in the future. For example, the divorce judgment may explain how you are to divide your personal property after the divorce, or provide rules about how you must sell real property after the divorce.

CAN A PROPERTY DIVISION BE MODIFIED LATER?

The Oregon divorce court’s property division, once finalized in a judgment, is non-modifiable except in rare exceptions. One exception is for “omitted” assets, where a significant asset is left out of the property division. The court’s authority in this instance depends on whether the asset was omitted accidentally or intentionally.

Personal Property

WHAT IS PERSONAL PROPERTY?

Oregon law defines personal property to include assets such as furniture, clothing, art, books, jewelry, household items and even pets.

HOW IS PERSONAL PROPERTY VALUED?

Personal property may be difficult for the Oregon divorce court to value because these items may not have significant resale value yet may have significant practical or sentimental worth. If at all possible, you and your spouse, rather than the court, should agree on a division of your personal property with the assistance of your Oregon divorce attorney. It may be easier to do this if you omit the valuation process for personal property items and simply list who will keep each item. You may be able to agree on most items and leave a few disputed pieces, such as valuable artwork, for the court to value and divide.

HOW DOES THE OREGON DIVORCE COURT DIVIDE PERSONAL PROPERTY?

The Oregon divorce court treats personal property just as it does other assets: it characterizes the property (as marital or separate), values it (using experts or sale value, if necessary) and then divides it as part of the overall division of your assets and debts.

The division of personal property is often irrationally argumentative, given that many personal property items are inexpensive or can be duplicated. One of the benefits to experienced Oregon divorce attorney counsel is that your attorney can give you a more objective analysis of the worth of this property in the context of your case. For instance, a good divorce attorney might advise you that you are better off giving up a certain item than spending ten times its value in attorney fees arguing over it.

WILL I KEEP MY SEPARATE PERSONAL PROPERTY?

As with real property or accounts, some personal property may not be considered a marital asset under Oregon law. Such items may include gifts (such as wedding rings), inherited items or assets acquired before the marriage. Strictly speaking, just as with all other kinds of property, the Oregon divorce court is allowed to award such separate personal property to the other spouse if it is “just and proper” to divide in this way. As a practical matter, however, usually separate personal property will stay with its owner.

Real Estate

HOW WILL THE OREGON DIVORCE COURT DIVIDE REAL ESTATE?

If your real estate is not divided by a settlement, the Oregon divorce court will usually divide your jointly-owned real estate evenly. Typically, one spouse will be awarded each real property and the other will receive an “offset,” which is cash, or other property equivalent in value, from your combined holdings, or the spouse awarded the property will also be assigned an equivalent amount of debt (such as the mortgage). The Oregon divorce court may also order that a property be sold and the proceeds divided in a particular way. If one spouse used separate property as a down payment on jointly-owned property, then the court might award that spouse the amount of down payment and the estimated value of its appreciation. The Oregon divorce court can also divide real estate located in other states.

WILL I KEEP MY SEPARATE REAL ESTATE?

You or your spouse may own a home or other real estate that is titled in only one spouse’s name. This may be because the property was purchased that way, or because one spouse signed a quit-claim deed transferring ownership solely to the other spouse. Even if the property is titled in only one name, it may still be joint, marital property (if, for instance, marital funds are used for its upkeep). Even if it is truly separate, it will not necessarily stay with its owner. Separate real estate, like all other kinds of separate property, is still subject to division in a divorce in Oregon and possibly may be transferred to the other spouse.

Equity

The Oregon divorce court may divide any increase in equity of your real estate, family businesses and other investments during your marriage. For instance, even if you purchased your home as separate property before you were married, the court could divide any increase in home equity that occurred during your marriage. Similarly, even if you began your business separately, the court could award your spouse half of the appreciation during your marriage. The Oregon divorce court can also divide premarital equity, just as it can divide other separate property, depending on the particular circumstances of your case.

Bank Accounts and Trusts

Bank accounts and trusts, as with any other assets, may be divided by the Oregon divorce court in your divorce regardless of whose name is on the accounts or whether they are separate property. If your account values are substantial or if the account includes both separate and joint funds, then you may wish to have a forensic accountant track the history of the account. With proper accounting, sometimes the Oregon divorce court will exclude part of an asset from property division. For example, in dividing the contents of a bank account, the court may divide only the portion of the account acquired during the marriage, and give the remainder to the spouse who separately (and pre-maritally) earned those amounts in the divorce settlement.

Vehicles

Vehicles are included in the “equitable distribution” of property in a divorce in Oregon. Thus, vehicles are not necessarily granted to the spouse who has title. Your best approach is to agree on a division in a settlement, rather than having the Oregon divorce court value your vehicles and divide them.

If your divorce property division will change the ownership of any vehicle, make sure to change title with the Department of Motor Vehicles and to inform your automobile insurance company.

Retirement Benefits and Pensions

Retirement benefits and pensions are also subject to equitable division in your divorce in Oregon. Retirement benefits may be considered marital property and the spouse who is not named on the account may be awarded a share of it. If the retirement benefit or pension was earned during your marriage, the Oregon divorce court will usually split it evenly between you and your spouse. With careful accounting, the court may divide only the portion of the account acquired during the marriage, and give the remainder to the spouse who separately (and pre-maritally) earned those amounts.

Business Interests

There are several ways that businesses owned jointly by you and your spouse can be divided in a divorce in Oregon. One method is an agreement in which one of you “buys out” the portion owned by the other spouse. Another method is for payments to be made from the co-owned business to both spouses over a specified period. It is also possible for parts of the business to be given to each spouse. Some spouses may be even able to remain business partners after a divorce. The Oregon divorce court usually will not order you to continue sharing the business without both of you requesting it and showing that you can remain professional with each other. As with other assets, it is essential that you know the value of the business (often with the help of an appraiser, and usually involving calculation of both present and future value) before you agree to any division.

Even if a business is owned by only one of you, the Oregon divorce court may divide the business, especially if it finds that the non-owner spouse provided labor or otherwise contributed to the business.

If you are a business owner facing divorce in Oregon, look for an Oregon divorce attorney with experience specifically in divorce involving business valuation and distribution.

Investments

The Oregon divorce court has two options when determining how to divide your investments in a divorce in Oregon.

  • One option is to distribute the investment “in-kind” based on equitable percentages (that is, fair shares between you and your spouse).
  • Another option is a distribution based on the current value of the investment, i.e. the “buy-out” option. One spouse keeps the investment and pays the other spouse for half its value (or whatever division the court decides is fair). This method requires a current valuation and analysis of relevant income tax issues.

You and your Oregon divorce attorney, together with your tax professional, should carefully analyze whether to ask the court to distribute your investments based on either the “buy-out” option or the “in-kind” option.

Stock Options

Stock options are a company’s promise to sell company stock to its employees at a specific price. Stock options (both non-vested and vested) are considered property subject to distribution in a divorce in Oregon. Because stock options are assets that may or may not be exercised, and because their value may change over time, it can be a difficult task to value and distribute stock options.

Just as with other kinds of property, the Oregon divorce court will determine whether the options are marital or separate property. The court will usually examine the date and purpose of the stock option grant. If the grant was meant to reward past or present service to the company, then the grant is probably marital property. However, if all or a portion of the grant is meant to elicit future service to the company, or as future compensation, then the grant may be separate property.

Vested stock options are usually more straightforward to value and divide. Non-vested stock options are much more difficult to identify, value and divide and usually require the involvement of tax and financial experts in addition to an Oregon divorce attorney. Division of stock option assets can be handled in two ways:

  • The options remain with the employee spouse, and the court will have the non-employee spouse buy out or receive an offset for half of the agreed value of the marital stock options, as part of the overall division of property and debts.
  • The court will not include the value of the options in the overall property division, but will instead require that the non-employee spouse be paid in the future, when the options vest, rather than at the time of your divorce in Oregon. This is called deferred distribution.

Your Oregon divorce attorney can work with the financial experts and help you determine how best to approach the division of any stock options.

Stock options can, in some circumstances, be considered income for the purpose of establishing or modifying spousal support. Your Oregon divorce attorney and tax professional can help you analyze this when deciding how to divide stock options.

Division of Debts

The Oregon divorce court will divide your marital debts in whatever way it finds “just and proper.” Division of marital debt is most often divided equally between you and your spouse in a divorce in Oregon. However, this may be rebutted by careful evidence that the debt was entirely (or partly) incurred by just one spouse. As with division of marital property, the Oregon divorce court is not restricted by whether a particular debt is in the name of only one spouse. It may assign responsibility to pay that debt to the other spouse when making the overall division.

Divorce Attorney Fees

Sometimes the Oregon divorce court will order one spouse to pay some or all of the other spouse’s attorney fees. This can be done in two ways: before or after the legal bill is incurred.

  • The Oregon divorce court can order one spouse to pay a lump sum towards future attorney fees and costs to allow the other spouse to pursue or defend a divorce.
  • The court can order that one spouse reimburse the other for attorney fees and costs already incurred.

The court may order that a spouse who acts unreasonably or in bad faith during the divorce pay all or some of the other spouse’s attorney fees. For instance, a spouse who hides or fails to produce financial documents may be ordered to pay the other spouse’s divorce attorney fees to get those documents. The court may also consider whether each spouse has made a good-faith effort to settle, and order attorney fees to be paid by a spouse who refuses to accept a reasonable settlement offer.