Last updated: November 30, 2022
Approximately 50 percent of first marriages end in divorce according to the U.S. Census Bureau. This can lead to divorcing couples to fight over property in divorce. Divorce is a complex process both emotionally and legally. Division of property is a major issue in many divorces, whether the amount of assets is a lot or just a little. Couples can avoid some of these battles if they manage their marital and personal property correctly. Divorce lawyers that provide free consultations can help start the process out on the right foot.
Division of Property In Divorce
In the event of a divorce, property distribution will proceed much more smoothly and involve less emotional upheaval should each person know what to expect (and should a good lawyer be involved!). The entire United States is basically broken up into 2-separate ways that property is divided during a divorce: community property states and equitable distribution of property states. Knowing the differences (and what type of state you live in) is the first and most important step to understanding what is marital property and what must be divided.
Dividing Community Property in Divorce
While the vast majority of states are equitable distribution states, a handful use community property rules or dividing property in divorce. Currently, there are 9-states that are community property states (primarily in the south/southwest): Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Community property basically states that all property acquired or earned during the marriage is marital and thus, subject to an equal (50/50) division upon divorce. This includes all property and all debts, regardless of which persons name the property is titled.
For example: husband and wife get married on January 1st. On February 1st, wife buys a car and starts making payments from her paychecks. The car is titled in her name only. After 4-years of payments from her separate account, the car is paid off. If they divorce, the car is marital property because even though it was purchased in wife’s name only, it was purchased with money earned exclusively during the marriage. Therefore, the value of the car needs to be split equally.
Equitable Division of Property in Divorce
The vast majority of states (41-states) follow these rules (which vary slightly, from state to state). Equitable division states deal with property in divorce slightly different. Rather than dividing property equally, property is divided according to what is “fair” (as determined by a judge). In most cases, fair is equal (50/50), but in many instances, one person should receive a larger share of property. This might be because one person earns substantially more than the other or their future prospects (like an advanced degree earned during marriage) will lead them into a higher paying career.
Avoiding a Fight Over Property in Divorce
Before getting married, think about having a lawyer for draft a premarital or prenuptial agreement that stipulates which property is exempt from division upon divorce or even death. This legal document should be detailed and encompass personal property held by each party prior to being married and possibly, property the parties are planning to acquire (such as additional retirement savings, etc.). Upon divorce, these items will be exempt from the marital estate, allowing the initial owner to retain them.
Organize Your Financial Documents
Maintaining complete financial records and statements during a marriage will make division of property an easier process. It likely will also limit the amount of time a lawyer has to spend going through your finances which in turn, will save you thousands of dollars. Use these documents to establish the separate nature of all property that either party wishes to designate as separate from their marital estate.
Not all property acquired during the marriage is marital property. Some property that a person obtains while married is separate.
Type of Property that is Not Marital
- Property held prior to the marriage
- This means property owned outright. A car purchase 1-year before the marriage where 4-years of payments are made during the marriage is marital property, but an investment account that exists before marriage where money is not added during the marriage will usually stay separate
- Property received as a gift
- Keep in mind that an inheritance is normally separate property and does not factor into the divorce. However, if an inheritance is “commingled” with marital property it might change it from separate to marital. Example: inheritance of $50,000 that gets put into a joint bank account and then is used to pay of a car or buy a boat. This would likely make the new property marital.
If you wish to keep personal property as an asset or within your side of the family upon divorce or death, continue to keep this property separate during the marriage. Do not commingle it with property acquired with a spouse during a marriage. Once property is commingled, it can be difficult to separate assets that were previously held by one party. Use only nonmarital property to purchase additional nonmarital property or the new property may be considered part of the marital estate.
Increases in Property Value
Any increase in the value of nonmarital property could be considered a marital asset. This means that upon the owner’s divorce or death, each spouse may be entitled to a portion. This rule holds true particularly if the appreciation in value is active, meaning it occurs through effort. Not all property in divorce is simple to categorize, the rules are tricky. Management of a stock portfolio is considered active appreciation while interest earned on a savings account is passive appreciation. Fixing up and spending money on a pre-marital home could change the homes classification to marital as well.
Understanding how the division of property in divorce works is the key to getting an idea what each spouse will retain after the dissolution of marriage is completed. Almost all divorce attorneys provide free consultations to help potential clients understand the rules that apply to each particular case. So, get organized, gather your paperwork, and stay calm – help from an expert divorce attorney is just a phone call away.