Distribution of Property Upon Divorce

When a couple goes through a divorce, they must decide how to divide their property, assets, and debts. You and your spouse may agree to divide your marital property in an uncontested divorce. However, in a contested divorce, the family law court judge will determine the property division.

The division of assets can be complex, especially if the spouses harbor resentment or anger toward each other. Whether you and your soon-to-be former spouse agree or disagree on property division, you should talk to an experienced divorce lawyer in your area. They can explain your options and work with you to protect the assets most important to you.

Understanding Property Distribution in Divorce

Each state has its divorce laws that determine the distribution of marital property. These state laws guide the court and the parties concerning how to divide property in a divorce. Generally, states fall into two property distribution categories: “community property” or “equitable distribution.”

Community Property vs. Equitable Distribution

In community property states, the court divides the marital property equally. On the other hand, in equitable distribution states, both marital debts and marital funds are divided fairly but not necessarily equally. Equitable distribution is the more common method.

Community Property States

With some exceptions, the property each spouse earns or acquires during the marriage is considered the couple’s community property. In a divorce, calculating property distribution is generally straightforward.

Property is classified as either marital (community) or a spouse’s separate property. The couple splits community property and liabilities equally. Separate property generally includes property acquired before the marriage. Separate property may also include an inheritance or gift given to one spouse.

Community property states are in the minority, and they are generally more common in western states. The states and territories with community property laws are:

• Arizona
• California
• Idaho
• Louisiana
• New Mexico
• Nevada
• Texas
• Washington
• Wisconsin
• Guam
• Puerto Rico

A few states have optional community property systems where spouses can create community property agreements, including Alaska, South Dakota, and Tennessee.

Equitable Distribution

In equitable distribution states, the courts seek to divide the couple’s property fairly. Equitable distribution is not necessarily equal distribution. The property distribution may result in unequal distribution. It is not a 50-50 split but takes several factors into account, including:

• Length of the marriage
• Age of the spouses
• Economic circumstances of each spouse
• Child custody
• Award of alimony or spousal support
• Earning potential of each spouse
• Each spouse’s contributions to the marriage
• Standard of living
• Hidden assets

Tips for a Fair Property Settlement

When seeking a fair property settlement, it is critical to consider each spouse’s financial and non-financial contributions. This may affect the division of assets, subject to any prenuptial and postnuptial agreements.

Dividing the Family Home

The marital home is one of the most significant assets involved in the division of property. It is difficult to divide real estate property during a divorce. Unlike a bank account, a married couple cannot split a house in half after separation. If one spouse purchased the house before the marriage, that spouse usually retains the house in the divorce settlement.

The judge will decide if the couple cannot agree on which spouse should leave the home they purchased together. Sometimes, the judge will require that they sell the house and split the profits. Other times, the judge will require one spouse to buy out the other spouse’s interest in the house.

The judge can award the house to one spouse and property of equal value to the other. If the couple has a minor child, the judge may be more likely to let the primary caregiver remain in the house with the children. The other spouse may receive other property in an equitable division.

Prenuptial Agreements

A prenuptial agreement is a contract between two people in consideration of marriage. A prenup determines property division for certain property in a divorce, including individual assets, retirement accounts, business property, and spousal maintenance.

Generally, when a divorcing couple has a valid prenuptial agreement, the agreement determines the property distribution. The court will typically enforce the terms of the prenup unless there is an indication of an issue with the agreement, such as whether it was signed voluntarily or provided a full disclosure of assets.

Business Assets in a Divorce

Business assets can make property distribution more complicated. If one spouse only has a financial interest in the business, the court may balance the business assets with other property, including investments, money, or real property. Talk to your divorce attorney if you have any concerns about the distribution of business property upon divorce.

Factors Influencing Property Division

It is generally in both spouses’ interests to settle property distribution agreements before going to court. The spouses can take control of the process and negotiate to divide property in a way that meets their needs. They must also consider a division for liabilities such as credit card debt and student loans.

It may be more cost-effective, save time, and help the spouses stay on better terms after the date of separation when they reach an agreement on their own. When the parties cannot agree, a court order will control the division of assets.

Factors that can influence property division include:

• Whether the property is marital or separate property
• Whether the state follows community property laws or equitable division laws
• The length of the marriage
• Contributions to the marriage
• Earning capacity and financial needs
• Custody of the children
• Debts and liabilities
• Prenuptial or postnuptial agreements
• Whether there was misconduct or waste of assets
• Future financial considerations

If you have questions about dividing property or encounter a roadblock, consult your family law attorney for advice.

Legal Representation in Property Distribution

Hiring an experienced local divorce attorney is essential. They can provide legal advice and protect your rights throughout the property distribution phase of the divorce process.