South Carolina is an “equitable apportionment” state. That means that South Carolina divides marital property and marital debt based upon a number of factors, rather than an automatic percentage. “Community property” states typically divide marital property and marital debts on an automatic 50/50 basis. While South Carolina Family Courts more often than not divide marital property and marital debts on a 50/50 basis, that percentage division is not automatic or required.
“Marital property” typically includes all property (as well as debts) owned as of the date of the filing of the Family Court action that were acquired during the marriage. “Marital property” does not typically include property that either spouse brought into the marriage, or received from third parties by way of gift or inheritance. Gifts between the spouses during the marriage, however, are considered marital property. Property that was acquired by either spouse prior to marriage or through gifts or inheritance from third parties, is normally known as “separate property”, which the Family Court has no jurisdiction to divide at divorce. However, there are circumstances when “separate property” can be divided when that property has been transmuted into marital property, or where appreciation has occurred during the marriage through the marital efforts of the spouses. “Separate property” can also include property which has been excluded under a valid pre-nuptial agreement.
In making an equitable apportionment of marital property and debts, the Family Court must consider the following factors:
- The duration of the marriage together with the ages of the parties at the time of the marriage and at the time of the divorce or separate maintenance or other marital action between the parties;
- Marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce as such, if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage (with exceptions);
- The value of the marital property, whether the property be within or without the State. The contribution of each spouse to the acquisition, preservation, depreciation, or appreciation in value of the marital property, including the contribution of the spouse as homemaker; provided, that the court shall consider the quality of the contribution as well as its factual existence;
- The income of each spouse, the earning potential of each spouse, and the opportunity for future acquisition of capital assets;
- The health, both physical and emotional, of each spouse;
- The need of each spouse or either spouse for additional training or education in order to achieve that spouse’s income potential;
- The nonmarital property of each spouse;
- The existence or nonexistence of vested retirement benefits for each or either spouse;
- Whether separate maintenance or alimony has been awarded;
- The desirability of awarding the family home as part of equitable distribution or the right to live therein for reasonable periods to the spouse having custody of any children;
- The tax consequences to each or either party as a result of any particular form of equitable apportionment;
- The existence and extent of any support obligations, from a prior marriage or for any other reason or reasons, of either party;
- Liens and any other encumbrances upon the marital property, which themselves must be equitably divided, or upon the separate property of either of the parties, and any other existing debts incurred by the parties or either of them during the course of the marriage;
- Child custody arrangements and obligations at the time of the entry of the order; and
- Such other relevant factors as the trial court shall expressly enumerate in its order.
The Court’s Order as it affects distribution of marital property shall be a final order not subject to modification except by appeal or remand following proper appeal.
Marital debts must also be divided between the spouses. The Court is not bound to divide the debts in same percentage as it divides the assets. In order to be considered a marital debt and divided accordingly, the Court must consider whether or not the debt was incurred for a marital purpose.
Generally, a division of marital property is a non-taxable event. Usually, if property is transferred between spouses pursuant to a Marital Settlement Agreement or a Court Order, it will neither be taxed as income nor allowed as deduction. There may be tax consequences, however, when funds are transferred retirement and individual retirement accounts and when marital assets are transferred to third parties. There are ways to transfer retirement asset without incurring immediate tax liability. Some retirement plans will require a special Order specifically designated to transfer plan assets. These Court Orders are called “Qualified Domestic Relations Orders” (sometimes referred to as “QDRO’s”).