Divorce comes with any number of expenses. You have court costs, filing fees, an attorney to pay, and even a change in tax status. Those are the obvious ones, but there are others. In many cases, you need to find a new place to live. Perhaps your custody arrangement necessitates buying a new car to shuttle kids back and forth.
These are just a few situations that can lead you to make a major purchase. The question arises, however, how does this impact your divorce? If you buy a car during divorce proceedings, can you lose it when you come to the division of property? Does it make you look bad in the eyes of the court? Like most elements of divorce, there’s much to consider before you go on a spending spree.
Related Reading: The New Tax Plan and Divorce: What You Need to Know
Separate V. Marital Property
In Oregon, there are two kinds of property, and the state treats each in a different way. We have separate and marital property.
- Separate Property: Separate property, like it sounds, belongs to one spouse or the other. Most often, this is something owned prior to marriage, but not always. It can include things like gifts or inheritance. Courts can include this in the pot to divide, but it usually stays with the owner. Though in cases of longer marriages, the line between separate and marital property often blurs.
- Marital Property: In general, the court views all property accumulated during a marriage as marital property. No matter whose name appears on a title, Oregon presumes that both spouses contributed to acquiring assets. It is subsequently up for division in a fair, equitable fashion.
Spouses can and most often do work together in some way to divide property. This can be bargaining and haggling on their own terms, or through a process like mediation. Either way, a judge has to sign off on any divorce agreement. If it skews too far one way or the other, it may be tossed out.
Related Reading: 5 Ways to Move on After Divorce
How Major Purchases Impact Divorce
Oregon’s equitable distribution model influences how courts deal with major purchases made during divorce. Where the money came from colors how they look at and ultimately classify acquisitions.
Using shared funds usually results in that item being treated as marital property. On the other hand, if you use outside resources to make a purchase, it may fall under the separate property umbrella.
Oregon generally views each spouse’s income as marital funds. Major purchases made with these funds will also likely be viewed as such. The courts do retain the power to use these items to achieve an equitable split in the division of property.
Related Reading: Should You Sell Your Home During Divorce or Not?
If You Make a Purchase During Divorce
There are no specific, hard-and-fast guidelines for splitting assets under Oregon’s equitable distribution laws. The goal is for both parties to emerge on relatively equal footing and for both people to maintain a standard of living similar to during the marriage.
When it comes to a major purchase made during divorce, many factors come into play. A big one is where the money came from. If you use separate money to buy a car, you’re probably good. However, if you use a shared account or similar funds, the court may view it as an asset to divide.
Spending can also influence divorce in other ways. For instance, if you claim you can’t make child support or spousal support payments, but throw around cash with abandon, it can reflect poorly on your case. It’s one thing to buy a safer, more reliable car to drive the kids around, or pick up a couch for a new place. But if you buy a jet ski and claim to be broke, that looks bad.
Related Reading: 8 Common Mistakes Men Make in Divorce
If Your Spouse Makes a Purchase During Divorce
Making major purchases during a divorce can impact your case. They can also affect your spouse’s situation in similar ways. If your soon-to-be-ex argues for spousal support but buys a snowmobile, or something else impractical, it won’t likely help the cause.
One frequent worry is that the other side will run out and use community funds on big-ticket items. Warring spouses have been known to drain joint accounts. Reckless spending like this can put you in a hole. If you have this concern, you may be able to prevent this type of behavior.
You should always keep an eye on finances. Additionally, depending on the circumstances, it’s possible to convince the court to call for a temporary financial restraining order. This action allows for regular purchases, like gas or groceries. But when it comes to major purchases with shared funds, both parties need to approve.
Related Reading: 10 Steps to Creating an Effective Divorce Strategy
Financing Major Purchases
Most major purchases are financed. Cars, houses, furniture, electronics. At times it may look like your future-ex is on a spending jag, but that’s not always the whole truth. Whether or not such purchases are game for the division of property varies from one case to the next.
If a down payment comes from shared funds, the court may account for that. They often look at these purchases as pre-divorce property. However, if that down payment originated from a separate source, the court may declare the item in question, and any future payments, belongs to the purchaser.
Related Reading: 6 High Asset Divorce Mistakes to Avoid
It’s important to know, divorce doesn’t negate any loans, contracts, or financial deals you and your spouse entered into while married. If you purchase something together and make regular payments, both names stay on the paperwork. It’s possible to refinance loans and the like, but ending your marriage doesn’t get you out of pre-existing agreements.
This is important because it can impact your financial future, and continue to do so for a long time. Say your spouse winds up responsible for a joint car loan. If your name remains on the records, and any payments get missed, it negatively impacts you. It can ding your credit score and creditors can even come after you.
It’s best to have your ex refinance any loans and remove your name. You may be able to have a provision like this written into the final divorce agreement, even a deadline. Still, follow through is something else. Definitely make sure this happens and be aware of the impact it can have if it doesn’t.
Odds are, you’ll have to make at least a few major purchases during your divorce. It’s important to understand how these influence the proceedings. And there are ways to reduce the havoc they can cause. Stay away from impulse buys. Think all big purchases through in a calm, logical manner. If you do have to have to buy an expensive item, don’t hide it, know where the funds came from, and be aware of how it may influence your situation.
If you have questions about your divorce, contact Goldberg Jones at our Portland office. We’re happy to discuss the specifics of your case and help where we can.
Related Reading: Is Oregon a Community Property State?