WHAT IS PROPERTY?
A discussion of divorce property division in Hawaii covers everything the couple owns (“positive” property, or assets) and owes (“negative” property, as in debts). In terms of assets, property can include real property (real estate), bank accounts, life insurance, investment accounts, vehicles, retirement, personal belongings, and household goods, among other things. Debts can include personal loans, credit card balances, mortgages, equity loans, and other types of debt.
HOW DOES OUR PROPERTY GET DIVIDED?
Hawaii is an equitable distribution state, which means that the Court seeks to divvy up the assets in a fair manner (note that “equitable” and “equal” are not necessarily the same thing). Property division in Hawaii is based upon the Marital Partnership Model. As it sounds, the Marital Partnership Model views the marriage like a business partnership (from a financial perspective), where both parties contribute money, effort, and energy, and in a dissolution (divorce) divide the profits/losses equally. That being said, both parties may claim what they brought into the marriage initially and what they received during the marriage as a gift or inheritance.
Title on a property does NOT necessarily control how it is awarded in a divorce
Division of a couple’s property in a divorce is not based upon under whose name it is titled. In other words, a car held in husband’s name does not get awarded to husband just because the registration is in his name, nor does a house get awarded to wife just because it is titled in her name. Rather, the Court will look at when the property was acquired – was it obtained before the marriage? Was it purchased during the marriage? Was it received during the marriage as an inheritance or gift?
MARITAL SEPARATE PROPERTY AND MARITAL PARTNERSHIP PROPERTY
In a divorce, the Court is first classifying the couple’s property into two classifications: Marital Separate Property and Marital Partnership Property. Marital Separate Property: Hawaii case law spells out Marital Separate Property as being “property owned by one or both of the spouses at the time of the divorce:
a. All property that was excluded from the marital partnership by an agreement in conformity with the Hawai’i Uniform Premarital Agreement Act (HUPAA), HRS chapter 572D
b. All property that was excluded from the marital partnership by a valid contract and
c. All property that (1) was acquired by the spouse-owner during the marriage by gift or inheritance, (2) was expressly classified by the donee/heir-spouse-owner as his or her separate property, and (3) after acquisition, was maintained by itself and/or sources other than one or both of the spouses and funded by sources other than marital partnership income or property.”
Note that Marital Separate Property is not very common, with most property falling into one of the Marital Partnership Property categories (below).
Marital Partnership Property: “All property that is not Marital Separate Property.”The vast majority of assets in divorces is Marital Partnership Property, as Marital Separate Property, as noted above is considerably more unusual. Marital Partnership Property is then broken up into five categories:
Category 1: value of all property owned by either party as of the date of the marriage, excluding the value of any gifts from one spouse to the other;
Category 2: the increase in value of Category 1, from the date of marriage until the conclusion of the divorce;
Category 3: value of all property separately acquired during the marriage by gift or inheritance to one of the parties, the value being calculated as of the date the gift or inheritance was received, excluding the value of any gifts from one spouse to the other;
Category 4: the increase in value of Category 3, from date the gift or inheritance was received until the conclusion of the divorce; and
Category 5: value of all property of either party at the conclusion of the divorce, excluding Categories 1, 2, 3, and 4.
A standard property division will award each party their own Category 1 and Category 3 values off the top, with the parties equally dividing Category 2, Category 4, and Category 5. The Family Court may rule to not divide Categories 2, 4, and 5 equally, if there are equitable considerations that justify deviation from 50/50. This deviation from 50/50 division of property is not common however, with an equal division of Categories 2 (increase in premarital property), 4 (increase in gift/inheritance property), and 5 (present property excluding Categories 1, 2, 3, and 4) being the standard. We’ll be posting some examples to help understand how property division works shortly.
WHEN IS THE PROPERTY VALUED FOR DIVORCE DIVISION?
Technically, property values for divorce division is supposed to take place at the Date of the Conclusion of the Evidentiary Portion of Trial (“DOCOEPOT”), although for practical purposes, many assets such as real property are valued by way of appraisal at least a few months prior to trial. One of the effects of this is that simply moving out (physically separating) or even filing a complaint for divorce does not cause each party’s property to be separate from that point. Rather they can continue to accumulate marital (and thus divisible) property through the divorce process.
Is the discussion about divorce property division making your head spin? It’s often not a simple process. If you have a question about divorce and property division, and would like to set up a consult, e-mail us or call us at (808) 593-2199. We’ll be happy to hear from you.
FURTHER READING ON DIVORCE PROPERTY DIVISION IN HAWAII