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$1B divorce award sheds light on property division issue

Generally speaking, when one spouse acquires property prior to the marriage that property remains separate in nature and is not subject to division upon divorce.

However, if the asset appreciates during the marriage, which many financial assets do, the added value could be considered marital property and subject to division in divorce in certain circumstances. 

The recent multibillion-dollar divorce case of oil tycoon Harold Hamm is an example of how this works. The Hamms filed for divorce after 26 years of marriage in the state of Oklahoma, which takes a similar approach to Florida on the issue.

Harold Hamm had started the oil company Continental Resources prior to the marriage, though it did not become wildly successful until years later. As Reuters reports, Continental was worth an estimated $50 million when the Hamms were married, and was worth an estimated $18 billion when the divorce case went to trial.  

The couple never signed a prenuptial agreement, so even though Hamm started the business before the marriage, his wife argued that she was entitled to a fair and equitable share of the amount Continental appreciated during the marriage.

However, under state law, the appreciation had to be “active” instead of passive in order to be considered martial. That means the appreciation had to be the result of efforts on behalf of one or both spouses instead of market factors outside of the parties’ control.

After weeks of consideration, the judge presiding over the case eventually ruled earlier this month that only $1.4 billion “resulted from efforts, skills, or expended funds of either spouse” during the marriage. Hamm’s wife was ultimately awarded around $1 billion in cash and assets. She plans to appeal the decision.

This case represents not only one of the most expensive divorces in American history it also reminds us how important it is to adequately understand state law, especially when deciding whether or not to enter a prenuptial agreement. Perhaps Hamm didn’t enter one assuming that his business would remain separate property since he started it prior to the marriage.

To find out more about property division in the state of Florida, talk to a family law attorney in your area with experience in high net worth divorce.

Source: Reuters, “The $1 billion divorce: Why Harold Hamm's ex-wife didn't win more,” Joshua Schneyer, Nov. 16, 2014

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