Division of Property In a Divorce
You’ve decided to get a divorce but are concerned about your financial future. When you were with your soon to be ex, everything seemed to be on schedule and planned out. Now, your finances are completely up in the air and you wonder what rights you have to assets such as the 401(k), the home, and other assets accumulated during the marriage.
Every state uses its own formula when determining the division of property accumulated during the marriage based on whether the state is an “equitable division of property” state or a “community property” state (and no two community property states follow exactly the same rules, to add to the confusion). At the bottom of this article is a list of all states and whether they are equitable division of property states or community property states.
Equitable Division States
Equitable division states believe that property acquired during the marriage is normally considered “marital property” that should be divided in a fair and “equitable” manner. This does not mean that the married couple will split the assets (or debts) on a 50/50 basis. This means that the court (judge) will take into account various factors, such as the length of the marriage, the value of each spouse’s marital and non-marital property, the age of the spouses, the contribution each spouse made to acquiring and maintaining the spouse’s property, and many other elements.
Community Property States
Community property states view property acquired during the marriage as marital property and thus an equal 50/50 split of that property should take place during the divorce. Because this property is divided evenly, figuring out how exactly the property should be divided is a little easier than in an equitable division of property state because the laws requiring a 50/50 division takes the guesswork out of the formula.
Factors in Dividing Assets During Divorce
- While every case is different, we can offer some general advice on how assets are divided in a divorce. By attempting to work things out with your spouse, you can limit the financial impact the court will make on your life and instead, keep those decision between you and your spouse. Below you will find considerations and tips that should help:
Before the case goes to court, as a couple, you can make arrangements concerning your assets. If you can agree on all terms, you can actually have an uncontested divorce, which will save both parties significant money in legal fees.
- The property division itself is often dictated by the time the property was acquired. For instance, if one spouse brought an asset into the marriage, that asset may not be considered joint property. There are also times assets acquired during the marriage, such as a monetary gift or an inheritance specifically given to one party, are still considered individual property. However, any gains with the use of said funds might be considered a joint asset.
- Retirement accounts can be tricky because there are other considerations to make. For instance, when are you eligible to withdrawal from the account? What are the tax implications of closing out the account now? You may also decide to forego your right to these accounts in exchange for another asset, such as the family home or car. If you do decide to do this, just make sure you have an accurate evaluation of the asset not only for today, but the value of the asset in the future. This will help ensure you “trade off” the proper value of the marital asset.
- Hiring a finance expert is often a very good decision when pension plans and 401(k)’s are involved. If you already have a divorce attorney, he or she more than likely already works with someone on a regular basis or can make a recommendation. This will give you a much better idea of the value of the accounts and what rights you have to them.
- If you cannot come to terms with your spouse prior to the divorce, the presiding judge will have the final say in how these assets are divided. The court will consider the time of the marriage, contributions made by each spouse, and current and future income before making a final decision as to how to split the marital assets.
Learn Your States Division of Property Laws
By learning the rules on the division or property laws in your particular state, you can estimate what will happen during your divorce. This will help you in the negotiation process with your spouse and give you a leg up throughout the process. Hiring an expert local divorce attorney is also a good idea so that your property rights are secured and you get and keep the property that you deserve!
Equitable Distribution States:
*(parties can voluntarily elect into Community Property status when married in the State of Alaska)
Community Property States