Property and the Presumption of Equal Contribution in a Divorce

One of the biggest surprises in divorce?

The law often assumes equal contribution, even when one spouse earned the paycheck and the other carried the invisible labor.

This episode of Modern Family Matters explores the critical distinctions between marital and separate property in divorce proceedings, with particular emphasis on how these principles apply to business assets. 

Host Steve Altishin and Founding Attorney Lewis Landerholm explain that Oregon courts have jurisdiction over all property, but the presumption of equal (50-50) contribution applies specifically to marital assets—property that came into existence during the marriage, regardless of whose name appears on the title. 

The discussion emphasizes that while courts can divide any property, the burden of proof shifts dramatically depending on whether an asset is presumed marital or separate. When businesses are involved, complexity multiplies exponentially due to valuation challenges, emotional attachments, overlapping areas of law (trademark, copyright, regulatory compliance), and potential post-divorce complications. 

Let’s talk about separate vs. marital property, where this presumption comes from, and how it protects both spouses.

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Steve Altishin: Hi, everyone. I'm Steve Altishin, Director of Client Partnerships here at Pacific Cascade Legal. And today I'm here with our founding attorney, Lewis Landerholm, to talk about separate property, marital property, and presumption of equal contribution in a divorce, and how that works when the property is a business. So that's a mouthful, Lewis. How are you doing today?

Lewis Landerholm: Yeah, I'm doing well, Steve. How are you?

Steve Altishin: I'm doing well i am so a lot to do in this one so let's get started just sort of with the basics and because it's it's a lot of times this gets confusing marital separate what that means and so let's kind of flesh that one out first by starting with just in general what property does the court have jurisdiction over in a divorce

Lewis Landerholm: Yeah. So technically, and this applies to Oregon, but a lot of states are similar, but essentially the court has jurisdiction over all property. In Oregon, we have marital property and we have marital assets. Marital assets are the, what you would consider to be like the marital property that came into existence during the marriage. Then you have marital property that if you think of it as two kind of circles and two Marital property encompasses all property. Marital assets is the property within the smaller circle that's come into existence during the marriage. So technically, judge has authority to do whatever they want with any of the property. But most of the time, we're dealing with the portion that's in that smaller circle, that marital asset component that came into existence during the marriage.

Steve Altishin: Yeah. And when you say all property, it doesn't matter whose name the property is and does it?

Lewis Landerholm: Right. Basically, any property that the marital union created, no matter whose name is on it, whether it's one spouse or the others or a spouse co-owned with another family member or business partners, It doesn't matter whose name is on the property. If marital funds flowed into that property, it can hit the balance sheet and be divided in a divorce.

Steve Altishin: So what does that really mean in terms of a judge deciding how they're going to distribute it. What does it matter if it's marital assets or not?

Lewis Landerholm: Yeah, so the biggest piece, so while the court has the authority to deal with any property, in reality, in most instances, we're dealing with that smaller circle, the part that came into existence during the marriage. With that property, the presumption of equal contribution, the That's the piece that most people think about. But it doesn't foreclose anybody from potentially getting a piece of other assets. And it gets complicated. These type of cases where you've got premarital and marital can be very complicated. We have unregistered domestic partnership law in Oregon. Other states like Washington have committed intimate relationship law. So there are potential ways that those assets get pulled into the case. It's just the presumption of a 50-50 split doesn't arise for those additional pieces of property. Another common one is inheritance. Inheritance, so long as it's not commingled, is typically separate property and will not hit the balance sheet and will not be divided. So there's a lot of nuances on the property side of things, but in general, we're normally working with the marital asset component, But you have to keep in mind that take a retirement account, for example. If somebody came into the marriage and they had $100,000 in the retirement account, but during the marriage, the retirement account grew from 100 to 300, that 200 could potentially be split as marital asset. So it gets complex with the calculation of what gains are we counting or not counting. But there are a lot of times house value starts at 300 when you get married. But marital funds go into the house. Then the house grows to $700,000. We've got $400,000 worth of equity that's marital that can potentially be divided. So there's a lot of analysis as far as what happened prior to the marriage and then what happened during the marriage. And those are factual analysis.

Steve Altishin: Yeah. Before we get going on this kind of second half, I want to talk about which is businesses. Can you just review for us? Cause I know a lot of people hear this and think they know what it means, but what a presumption means, what does it mean by presuming a marital asset? Does that mean it is fact or, or what does that mean? That thing? Presumptively.

Lewis Landerholm: Yeah. So in the law, it's a big deal because, it basically tells you where the starting point is. So then if you want to try to prove something otherwise, you have to prove away from that. So take, for example, a piece of property that was that you owned for 20 years prior to the marriage, that the presumption of 50-50 split doesn't arise. It's much easier for you to just say, well, I owned this 20 years ago, no marital funds, it's mine. Whereas otherwise, Anything that was purchased during the marriage where the court is going to start, the court is going to start at this is a marital asset. It's going to be divided 50-50, and it's up to one of the parties to rebut that presumption or prove as to the negative why it should not be marital property. So the burden shifts to that party who wants to somehow say, no, this piece of property shouldn't be split. So that's a much more complicated part of the case for that party who's trying to pull that piece out and a much more expensive part of the case because you have to be the one to prove it. The judge is going to start with, why shouldn't I split this 50-50? So you don't have to prove why you should get something. You're proving why somebody shouldn't get something. And that's just a very different starting point for the court and for the law. And so that's why it's such a big deal. As opposed to those cases where people are not married, I mentioned like the unregistered domestic partnership. So the standard in those cases are not about presumptions. It's about what are the intent of the parties. So we have to prove what the intent was. And that's a very different factual analysis. So that's why it's such a big deal in a marriage that we're starting at a 50-50 presumption and then working from there.

Steve Altishin: just blew into my head this question. If there's a presumption that marital property is split 50-50, is there also a presumption that separate property is not split? Is there that same sort of hurdle?

Lewis Landerholm: It's not so much that there's a presumption that it's not split. It's basically that the court has And this is in Oregon. In community property states, the separate property can be pulled in, but it's different. I can't really speak to the nuances of that. So it's not that a presumption is that it shouldn't be included necessarily. It's that you then have to go and you have to prove why it should be divided and why it should. So I guess it is sort of like a presumption that it shouldn't be divided, but it's not laid out necessarily that same way. It's not written the same way in divorce law that presuming 50-50, But with others, we're just not making any presumptions. It's basically like you have to prove why you should get a piece potentially or why somebody shouldn't get a piece. So it's more of kind of a free for all for those pieces of property that are outside of the, it's just that the presumption does not arise, you know, more so than there is a presumption. 

Steve Altishin: That's where the sort of fair and just in all circumstances comes in.

Lewis Landerholm: Yeah. And that's why the Oregon standard of fair and equitable gives a judge, you know, there are cases where, couple have been together for 40 years, but maybe they were only married for 10 years. Is it fair and equitable that that spouse who was able to save in their retirement account for those additional 30 years, where the other spouse at that point was say taking care of the kids or paying for the bills, but not saving in their retirement account. Is it fair that that spouse for 30 years that was allowed to do that because they were together and in a relationship, but because they weren't married the entire time, not get a piece of that 30 years worth of retirement? So that's where fair and equitable comes in, where the judge can say, no, it's fair to split this retirement account, even though they weren't married during that portion of it. Now, spousal support only relates to the marital component. That's for a different video. But there are nuances when it comes to those types of circumstances.

Steve Altishin: And when you say split, does the judge have more power than just to say you get this, you get that when it comes to property? Are there more things a judge can touch on about property and make orders about?

Lewis Landerholm: Oh, yeah, there's lots of things. They can make orders about the mechanics of how it's going to work. In some instances, say there's a reason, say there's little kids and the judge wants to allow one party who's potentially reentering the workforce to have an opportunity to refinance the house so that they can stay in the house with the kids. The judge has the authority to say, OK, within a year, within two years, you have to refi. If you can't refi within that amount of time, then the house goes up for sale. So it's not just the, you know, I talk about this with people all the time. It's not just the what is going to happen. There's also the how it's going to happen. And the how becomes a lot of instances, the most important part of it, because there's multiple ways to do things. And especially when there's assets that can be traded around, there's potential tax consequences. There's potential interest between the parties, one party trading. really wants retirement. Another party wants cash. Another party wants the house. Another party wants the cars or the investments or whatever it is. So there's a lot of trading and there's a lot of options that the court has when they can make rulings, not only in who's going to get what, but how they're going to get it.

Steve Altishin: And that's where you guys come in with your expertise. You've done this hundreds and hundreds and hundreds of times, and you can see the different ways this can go together.

Lewis Landerholm: Yeah, and I know we're going to get to the business part of it, but when you throw businesses into the mix, then it's a whole other ball of wax because you've got lots of competing interests to figure out in those cases.

Steve Altishin: Yeah. Just what I was going to start with. Everything you talked about, as you said, it can be very complex, but it kind of feels like if there's like an ongoing business, it adds to that complexity an awful lot to even determine what is marital, what is separate before you even get kind of like, how is it going to be divided?

Lewis Landerholm: Yeah. Oh, a hundred percent. So, Because businesses have that emotional component as well as the objective component. Talk to clients that, you know, businesses essentially have the component of feeling like your kids as much as it is this business because you've created it. You've built this from, in a lot of instances, either nothing or you've put investment into it. And so businesses, like everything else, the valuation can be divided. The interesting part or maybe the painful part for a lot of people with a business is people who own the businesses afterwards feel like sometimes they get hit twice because they've got to basically divide the asset, which is the value of the business at the time of the marriage. but also spouse support is also based off of that income coming from the business into the future. So you've got more things that are coming into play because you have to pay, buy somebody out of the business along with potentially paying support in the future income of the business. So businesses get very complicated, especially if there's partners, There's so many laws that come into play. If you've got liquor license, then OLCC gets involved. That's a whole nother component. There's a lot to go in with businesses and the whole premarital versus marital. There's a lot of times when somebody started a business and they've been running it for say 10 years, then get married. The partner comes in and then got marital funds that are flowing into the business, but say you know, the new spouse is working in the business, but wasn't necessarily getting an income. Well, you've got to deal with that. And you've got to look at what was the value of the business when they got married? What's the value now? What was the contribution? There's other arguments to be made if the other spouse never contributed or marital funds never flowed into the business, then maybe it's separate. And there was a lack of contribution. That's another argument that potentially can come in. in a business case so there's there's a lot to think through and a lot to uh to go through when we're dividing a business and everything else

Steve Altishin: and you would think that hundreds i mean i know a lot of businesses are legacy from the grandparent to the parent to them and i'm just thinking of business that you have an interest in but maybe the dad has a bigger interest in and You get married, and then the dad dies, and you suddenly inherit a lot more of the business, and your separate property has just become a lot of marital property or marital assets.

Lewis Landerholm: Yeah, or potentially, right? Potentially, yeah. Yeah, that would be complicated because you've got to figure out, okay, does that mean it's commingled? The judge has to determine, is that commingled or not? I think it depends on how long and what. It's a very factual analysis. The other thing that could be interesting is if it's a longstanding family-owned business and one spouse has an ownership interest, what do those bylaws for the business actually say? Does a divorce, sometimes a divorce will dissolve the entity. Well, if you're dissolving the entity, you're not just affecting your interest or your immediate family, but you're now affecting the larger family who owns this business. So it's really important to understand the business bylaws along with the divorce analysis so that we know exactly how that's going to play out. during the divorce because there may be reasons that you want to negotiate differently so that it doesn't potentially dissolve a business. So it's really, there's so many moving parts and things to think through when we're dealing with small businesses specifically.

Steve Altishin: Yeah. If there are multiple owners, I think I know the answer, but I'm not even sure, of a business and gets involved in a divorce, It sounds like a judge obviously has the power to order the people in the divorce what to do. But can the judge reach out and say something like, it has to be, there's a buy-sell, and say that has to be activated or that can't be activated? I mean, can non-parties to the divorce get sort of wrapped into this entire how a divorce, not necessarily whether it's a marital or not, but just how the judge decides to make the division.

Lewis Landerholm: Yeah, again, this is one of the pieces why small business divorces get really messy, because it can pull in business partners, because that, you know, normally what happens is, or what can happen is the business gets pulled in and becomes a party to the case because you've got, you know, especially when shares are involved in this type of things, like, you know, when it's maybe a little bit bigger of a business than like a small partnership, say. But yes, it's definitely possible that the business is ordered to do something. It's not typical. Normally, we're just looking at the value of the business and what's that spouse's valuation and worth of their portion of the business. And then that gets divided in other ways through other property. Normally, we just trade assets so the business can go on. into the future because it's normally advantageous for both spouses that the business continue. Because if that's where you're going to get potentially spouses for other payments from, then the spouse getting those payments is incentivized to make sure that that business is running as well. So there's a lot of reasons why not to upset that. But in certain aspects and instances, it does get involved and it does become pretty messy when we're talking about what the business has to do during the divorce.

Steve Altishin: I know we had a case once where, and I'm sure we've had more of them, sort of the main asset of the business was their right to produce something for another company. It was basically that was it, and both of them wanted to do it. And that's a copyright that has to be dealt with under some federal law, I guess.

Lewis Landerholm: Yeah. Well, and that's why it gets so complicated because there's so many different areas of law. You've got potentially like trademark copyright law, but you also have regulations in whether it's environmental regulations, whether it's, you know, different like OLCC regulations, you've got outside influence and outside rules that apply to that have to be dealt with. And so there's a lot of competing interests and complexity with which laws we're even talking about, which laws are going to be affected. And so we really have to A lot of times, depending on how complex it is, we'll pull in an expert to really help with that piece of the business division. But we've done creative things with businesses like keeping a spouse on payroll so that we didn't have to necessarily divide the business itself because the bylaws were going to require that so long unless one of the spouses could stay on as a co-owner. And so there are ways to do things if it makes sense for everybody, but it just really takes a lot more planning and a lot more analysis in deciding how we want to move forward.

Steve Altishin: Yeah. And again, I think that's where experience with business ownership issues and divorce comes in. It's almost like you're doing two different kinds of law in the same case.

Lewis Landerholm: Yeah. Or three or four. Or three or four. It can be a lot of different areas and types of law all coming together in the same case. And then you throw in the emotions of it all because that's the spouse who has put their blood, sweat, and tears into this business. There's that component as well. So yeah, business divorces can be really tricky and complex.

Steve Altishin: Yeah, I imagine even the complexity goes after the divorce is over. What happens if, like you said, you keep one of the spouses on, and then three years later, the other spouse finds someone else to marry who wants the old spouse fired?

Lewis Landerholm: Yeah. Oh, there's so many. And then what happens if the business doesn't perform? And who's to say, is it not performing on paper? I mean, it gets to be so tricky, and there's a million different circumstances that we've seen and had to deal with. And that's why it's really important to try to plan for all of it because you don't want to buy more litigation. If you try to do it yourself or don't know what you're doing and you divide it a certain way, but then you end up in business litigation later, you could turn a more simple-ish divorce into a very expensive, long, drawn out, business litigation case.

Steve Altishin: I think the key is this isn't the kind of a case that you want to obviously try to do yourself or for want of a better word, skimp. Oh, we'll just do this because it's easy. In the long run, you're going to be better off doing it the right way.

Lewis Landerholm: Yeah. At least getting some professionals involved to ask through, how should we do this? Because it will be very costly later. I mean, it would turn, for example, it's probably a 10X. The divorce was going to cost $15,000, $20,000 to get through it with a business, maybe a little bit more. If you get into business litigation over some complex issue, it can easily be 150, 200, $300,000 in the blink of an eye, because it just, it gets nasty fast.

Steve Altishin: Be prepared. And you need to, someone will say, well, hold on, that's why I had a lot of money, but you're going to need it. I mean, there are other professionals, like you just said, that are going to be involved. I mean, there's going to be people who value the business, who, you know, the other financial side of it.

Lewis Landerholm: Right. And potentially other attorneys to advise on maybe like a trademark or a copyright. Not every attorney has the expertise and the experience in every area of law. So we have to pull in experts to be able to tell us because we don't want to cause a problem in the divorce. So that's why we go and get a tax attorney or go get a trademark attorney or go get whatever it may be, real estate. So there's lots of reasons to just be mindful and careful in dealing with a divorce with the business.

Steve Altishin: Oh my gosh, absolutely. Wow. Louis, thank you for sitting down today to talk about this. This is really important stuff. It's really easy to mess it up. It's really easy to overlook things. One last thing I'm going to talk about, and I remember you and I talked about this with an attorney who only does liquor licenses. And she was talking about A couple who got a divorce. No big deal. It was easy. She gave the business to the husband, walked away. And OLCC walked in two months later and fined him $150,000 because she was no longer on the license.

Lewis Landerholm: Yeah, that's why I bring up OLCC because we've had multiple cases that most of the parties don't think about that when they're moving forward. And so it can be, that was the type of case where we left the one spouse on as an owner. Because the business entity didn't want to have to go through the OLCC recertification because of how costly and time consuming. And so that's why we had to do something a little bit different in that case to avoid the complexity of the regulations.

Steve Altishin: Oh, my God. That's nightmare stuff. And, you know, that's what's got to be fixed by a good attorney. And so thank you. Thank you again for being here. Just going through that whole marital presumption of equal contribution, all of that stuff, and especially how it works with the business. I think that's incredibly important for people to know. So thank you for doing this today.

Lewis Landerholm: Yeah, you're welcome.

Steve Altishin: And everyone else, thank you for joining us. And of course, as always, if anyone has any further questions, contact us. We'll get you connected with an attorney who can help. And until next time, stay safe, stay happy, and be well.