In a divorce in Indiana, everything a party has coming into the marriage and acquired during the marriage until the date of filing is all part of the one-marital pot for the trial court to divide.1 There is a rebuttable presumption the trial court should divide the marital pot equally.2 Effectively, this is everything you both own, minus what you owe, and divide by two, one-half to each party. However, the trial court has the discretion to make an unequal division. That said, in most cases, there is not enough cash to actually make the equal division or deviation from the trial court orders and that is where the term “equalization payment” comes into play that is analyzed in this blog.
In most mediations and at trial, each party will present his or her evidence as to the value of all marital assets and how he or she believes it should be divided. Normally, this is reflected in a marital balance sheet. The marital balance sheet lists houses, cars, personalty and has it listed for each party for what the litigant proposes he or she receives. That said, it is almost impossible with any division for cars and houses and cash on hand to wind up with a situation where the court makes an order that does not leave a shortfall in its division.
So for instance, if there is a $30,000.00 shortfall with the division ordered, the trial court may order one party to pay the other party an equalization payment to meet the division the court orders. Sometimes the court allows a party a payment plan to do so or orders it be transferred from a retirement account by what is called a Qualified Domestic Relations Order. These tools are the way the court actually reaches the division that it determines the evidence is fair and equitable. Most parties simply do not have enough cash to write the other a check to effectuate this division. The trial courts have great discretion to order equalization payments paid under such terms that are just and reasonable.3
To make the most of your situation, particularly if you are the spouse likely paying the equalization payment to the other spouse, you need to carefully develop the evidence with your attorney of the terms of how the payment should be made. If not, it is unlikely this discretionary call by the judge will get reversed on appeal. So make it clear in your testimony the terms you believe make the equalization payment work for you. We hope you find this blog explains the “equalization payment” concept to you and is helpful to your understanding of divorce law. This blog is written by divorce attorneys at Ciyou & Dixon, P.C. who handle complex custody and sophisticated financial divorce cases across the state. This blog is intended for general educational purposes only. It is not intended as legal advice or a solicitation for services. It is an advertisement.