In divorce, one of the most highly contested issues is property division. What you think is yours may in fact belong to both you and your spouse, and dividing up the property may be complicated. In Virginia, property is categorized into three different types: separate property, marital property and hybrid property.
Generally, separate property is property that belongs entirely to you. Some examples include property you acquired before your marriage, property given to you as a gift during your marriage, property acquired in exchange for other separate property during your marriage, and your portion of property that has been classified as hybrid property. An example of separate property would be the car titled in your name and which you purchased with your own money prior to getting married.
Marital property, on the other hand, is property acquired during your marriage. Marital property may include property titled in both you and your spouse’s names, property acquired by both you and your spouse during the marriage that does not qualify as separate property, and the marital portion of hybrid property. Some examples of marital property include pensions, deferred compensation and retirement plans acquired during the marriage. Courts presume that marital property is jointly owned by you and your spouse and will often be split evenly at divorce, unless you can present evidence proving the property should not be considered marital.
In Virginia, hybrid property (as the name implies) is classified as both marital property and separate property. Some examples include income earned from separate property, the increase in value (during the marriage) of separate property and commingled assets. For example, if you used pre-marital funds to make the down payment on what subsequently became your marital home which, in turn, appreciates in value during the marriage, the real estate will likely be considered hybrid property. Similarly, if you receive an inheritance at some point during your marriage and add the funds to an investment account owned by you and your spouse, the money in the account will be considered hybrid property.
How is Hybrid Property Divided?
While there is no bright-line test for dividing hybrid property, Virginia courts have developed specific methods for allocating hybrid property.
First used in Kentucky, the Bradenburg formula was adopted by the Virginia Court of Appeals and for years was the only way to divide hybrid property in the state. In essence, the Bradenburg formula looks like this:
– (Separate Contribution / Total Contribution) x Total Equity = Your Separate Interest
– (Marital Contribution / Total Contribution) x Total Equity = Marital Interest
For example, you and your spouse get married and buy a home together for $200,000. You used $20,000 of your own, separate money to make the down payment and take out a mortgage with your spouse for $180,000. When you divorce, the house has appreciated in value to $500,000 and during the marriage you and your spouse paid-down the mortgage by $50,000 to $130,000. Applying the Bradenburg formula, your separate interest would be:
($20,000 / $70,000) x $370,000 = $105,714.
The marital interest would be:
($50,000 / $70,000) x $370,000 = $264,286.
Because the marital interest will likely be divided in half at divorce, your total separate interest would be:
($264,286 / 2) + $105,714 or $237,857.
In some instances, application of the Bradenburg formula serves an injustice. For example, if you made the down payment for your marital home with separate property and during the marriage you and your spouse only paid off a small amount of the mortgage, the Bradenburg formula would give a majority of the home’s equity to you. Under the Keeling formula, the amount of your separate interest in the property will be the percentage of the home’s equity that you contributed when making the down payment.
For example, suppose you and your spouse purchased a home for $394,000 and you made the down payment for $108,439, or 27.5 % of the purchase price. At the time of your divorce, the house appreciated in value to $825,000. Because you contributed 27.5% when the house was bought, your personal share of the property will be 27.5% of the home’s value at divorce, and the remainder will be marital property.
The above analysis is a look at property division in its simplest form. In reality, determining how to divide hybrid property in divorce can be highly complex and requires the skill and experience of a lawyer who understand Virginia divorce laws. If you need assistance with property division or any other matter in your divorce case, contact our experienced DiPietro Law Group Attorneys today at (888) 530-4374 to schedule a consultation. We can provide compassionate, strategic help throughout the process and give you back peace of mind and the strength to rebound from your crisis.