NEW YORK (MainStreet)—Some are predicting the economic recovery could spark an uptick in divorces due to pent-up demand when people couldn't afford a divorce lawyer or sell the house. When couples divorce, a judge might decide how to divvy up assets like a house, bank accounts and retirement accounts, often based on decades of case law.
But what happens to digital assets like the couple's shared iTunes library or other accounts?
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There aren't many cases for couples or their attorneys to use as a guide. As several publications have previously covered, digital assets are also increasingly becoming an issue in estate planning.
Although these digital assets aren't tangible like a house car, or jewelry, they can still be considered marital property. When it comes to the online realm, the majority of states use a system called "equitable distribution," whereby any property that is acquired by either spouse during a marriage is considered "marital property" and assigned a value, according to Brian M. Moskowitz, a marital and family law attorney in Boynton Beach, Fla. "That property is then distributed equitably, or fairly, between the spouses," he says. "This doesn't always result in an even, 50/50 split of the property, but it does result in what is considered to be the fairest split."
Judges don't care which spouse actually downloaded songs on iTunes or built a Kindle library. "The digital asset would be treated just like a car that was purchased during a marriage and titled in only one spouse's name," Moskowitz says.
Of course, you can't split a car in half any more than you could split an ebook or playlist of MP3s. It is possible to transfer ownership of a car, but that's not always feasible with digital goods. "The user agreement may state you cannot [transfer ownership] and any judge's ruling would not supersede that," says Brette Sember, a former divorce attorney and author of The Divorce Organizer & Planner (McGraw-Hill, 2004). "However, the judge could then award something else in lieu of that."
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For instance, maybe your ex-husband gets awarded the extensive iTunes and Kindle libraries you amassed during the marriage (in which case you'd probably want to make sure your credit card is no longer tied to it), while you get the airline miles.
In fact, Kristen Sawicki, an associate of Philadelphia law firm Sacks, Weston, Petrelli, Diamond, & Millstein, says her firm has worked on a couple of divorce settlements in which airline miles were hot-ticket items. "Even though most states are no-fault now, we look at who used the account most during the marriage," she says. "Individuals do care about who they think is worthy. If one spouse was the primary flyer, he or she might be entitled to the majority of points." (Airline miles are one case where a transfer is possible, sometimes for a fee.)
Another area that married or separated couples might not consider is the value of an online business such as a blog or eBay storefront. "If your spouse has an asset like this that existed before marriage, and you contributed to it or helped increase its value—for example you edited blog posts, you posted tweets, or you did anything to advance it—the increase in value from the date of marriage is marital property and has to be divided," Sember points out.
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While this is still a relatively new area, Sawicki predicts that it may come up more in the future, perhaps as new digital products develop that don't even exist today. "I know my generation is much more digitally attuned than our parents, so I'm sure we'll see issues involving digital media coming up," she says.
--Written by Susan Johnston for MainStreet