Divorce and Property

When a marriage ends, couples must take on the task of separating their lives in the divorce process. Part of that process includes dividing property acquired by the couple during the marriage.

Property Classification

Classifying property in a divorce is a crucial step during property division. Generally, states classify property into two categories: marital and separate.

Marital property refers to assets and debts acquired by the married couple during the marriage. This includes property acquired by either spouse. This can include real property, investment properties, bank accounts, and personal belongings. Marital property is subject to property division according to state divorce laws.

Separate property includes assets owned by either spouse before the marriage. Certain gifts or inheritances granted to one spouse during the marriage may be separate property. Any property acquired by one spouse after the date of separation is also separate property. It is important to note that if the property is in only one spouse's name, that does not automatically make it a separate property.

A prenuptial or postnuptial agreement is a common way couples choose to protect their separate property before a divorce. These agreements outline each spouse's separate property to avoid questions of ownership in a divorce case.

Community Property vs. Equitable Distribution

There are two main ways to divide marital property: community property and equitable distribution.

Nine states have community property laws, including California and Texas. In these states, property obtained during the marriage is considered community property (and community debts).

Community property is also known as marital property. This means that each spouse has equal rights to the marital assets and liabilities. Community property states seek to split property as equally as possible, often 50/50 in divorce cases.

All other states (except Alaska) follow equitable distribution laws. Equitable distribution states focus on the equitable division of property. Equitable does not mean equal. These states focus on what is equitable or “fair" when dividing property between spouses. This may result in an unequal distribution of assets among spouses.

Debt and Marital Property

Spouses must address not only assets but also debts during divorce proceedings. Sometimes, one partner may be responsible for certain debts. An example of this is gambling debts. In this case, the court can appropriately divide the debts to the wrongdoer.

Courts typically divide household or general expense debts evenly. Some debts, like student loans to one spouse, seem like separate debts. Depending on the state laws, circumstances may make them divisible between divorcing spouses.

Taxes, Retirement Plans, Inheritances, and Personal Injury Awards

It's important to understand how divorce impacts your taxes. This is especially true for the year you're getting divorced but also for future taxes. If you need to divide your retirement accounts or other estate planning tools, you may need a special court order called a qualified domestic relations order (QDRO). Depending on the assets' valuation, you may want to consult a financial expert for advice.

Inheritances and personal injury awards are generally separate property. Separate property is exempt from the division of property between spouses. This means they are distinct from marital assets and owned solely by the spouse who received them.

Settlement Agreements

Every state allows divorcing spouses to enter settlement agreements. These agreements divide property and address issues like child custody, child support, and alimony.

Settlement agreements can avoid drawn-out court proceedings in a divorce. The judge will review it for equity, but it's typically granted as long as it's fair enough. Suppose both you and your ex can agree to a particular property division. In that case, settling your marital property issues outside of court may be in your interest.

Getting Legal Help

If you're getting divorced, you may want to get legal advice from a divorce attorney about your circumstances. State laws vary, and you'll want to understand how the laws of your state apply to your divorce.