Divorce Law

Distribution of Property Upon Divorce

When a couple goes through a divorce, they have to decide how to divide their property, assets, and debts. In an uncontested divorce, you and your spouse agree on how to divide your property. However, if the divorce is contested, the family law court judge will determine how to divide up property, leaving you not in control.

Property division can be a difficult process, especially when there is resentment or anger toward the other spouse. Whether you and your soon-to-be-ex agree or disagree on property division, you should talk to your divorce lawyer about your options and what assets are most important to you.

State Divorce Laws

Each state has its own laws on how to divide property in a divorce. Generally, states fall into two categories for property distribution, as "community property" or "equitable distribution."

Community Property

With some exceptions, property each spouse earns or acquires during the marriage is considered the community property of the couple. In a divorce, calculating property distribution is generally more straightforward. Property is classified as either marital (community) or separate property. Community property and liabilities are split 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 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 try to divide up the property in a fair way. Equitable is not the same as equal; it is not a 50-50 split but does take into account a number of factors, including:

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

Dividing the Family Home

The family home is one of the biggest issues involved in the division of property in many divorce proceedings. It is difficult to divide real estate property during a divorce. Unlike a bank account, a house cannot be split in half or shared after separation. If the house was purchased by just one spouse before the marriage, that spouse usually gets to keep the house in a divorce proceeding. However, the other spouse could make arguments about the contributions they made to the house's upkeep and any increase in value during the course of the marriage.

If the house was purchased together by the spouses and the couple cannot agree on which spouse should leave the home, then the judge will decide the issue. Sometimes the judge will require that the house be sold and the profits split between the parties. Other times the judge will require one spouse to buy out the other spouse's interest in the house, or the judge can award the house to one spouse and property of equal value (cars, jewelry, personal property, money) to the other spouse.

If the couple has a minor child, the judge may be more likely to let the spouse who is 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 that two people enter into in consideration of marriage. A prenup will provide for what happens to certain property in a divorce, including individual assets, accounts, business property, and spousal maintenance. Generally, when a divorcing couple has a valid prenuptial agreement, the agreement will determine how the property is to be distributed. The court will generally enforce the terms of the prenup unless there is an indication that there is an issue with the agreement, such as whether it was signed voluntarily or whether it provided a full disclosure of assets.

Business Assets in a Divorce

Business assets can make property distribution more complicated. If one or both spouses started a new business during the marriage or grew an existing business, the court may use equitable distribution to determine what happens with the business assets. If one spouse only has a financial interest in the business and is not involved with running 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.

Agreement on Property Distribution Before Divorce Court

When possible, it is generally in the interests of both spouses to settle property distribution agreements before going to court. If the spouses are able to negotiate how to divide up their property, assets, and liabilities, the court will not have to make the decision for them. It may also be more cost-effective, save time, and help the spouses stay on better terms after separation. If you have any questions about dividing property and narrowing down the property dispute, talk to your family law attorney for advice.