Dividing marital assets in a divorce is not always a simple matter. Parties do not automatically receive half of any assets acquired during a marriage, as laws vary among states. Suze Orman, a personal finance expert, recommends that couples work out their own division of property because if the case goes to court, property division will depend on whether you live in an equitable distribution or community property state.
Types of Property
Marital property includes real property, personal property, financial assets and business assets. Couples may jointly own real property such as the family home, a vacation home, and business and rental property. Personal property covers a wide range of items like vehicles, boats, furnishings, antiques and collectibles, and electronics, to name only a few. Financial assets may take into account any cash, savings, pensions, IRAs, stocks, bonds, mutual funds, children's education accounts, annuities and the cash value of life insurance policies. Business assets may involve a professional practice, sole proprietorship of a business or partnership. The division of business assets can become complicated if it includes a family-owned business at which both spouses have worked.
Community Property
In community property states, marital property is usually divided equally between spouses. However, a spouse who owns any separate property has the right to keep it. Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states. Community property includes all property a couple acquires jointly during a marriage and begins to accrue on the date of marriage. State laws determine when a marriage officially ends and may be the date of physical separation, date of legal separation, date on which the divorce petition or divorce agreement is filed, or the date your divorce or legal separation is granted.
Separate Property
In community property states, separate property is defined as property acquired before a couple marries. This may include pension or annuity income, inheritances and gifts. Any property acquired after the marriage using proceeds from separate property also remains separate property. One exception is if an asset is purchased or maintained with funds from both marital and separate property. In that case, the property may be changed to community property. Although the idea of separate property exists in both community property and equitable distribution states, unless there are special circumstances, the separate property owned by one spouse usually is not divided in divorce.
Equitable Distribution
States other than community property states divide marital assets based on what is fair. In other words, property may not be split 50-50. If a judge decides the case, the court will calculate the total value of all marital assets and then give each spouse a percentage. According to "The Modern Woman's Divorce Guide," in the 41 states following the laws of equitable distribution, all real and personal property owned jointly or separately by either spouse is subject to division in divorce. Marital assets include property acquired before or during marriage. Some of the factors the court may consider when dividing property include the age and health of each spouse, earning potential, services as a homemaker, premarital agreements and length of the marriage. It is possible that the court will grant a greater portion of the marital estate to one spouse.
Family Home
Deciding who gets the family home is another major consideration. Often the parent who has physical custody of any children most of the time may get the home. However, in community property states, if the house is included in one spouse's separate property, or was purchased with separate funds, that spouse can legally keep it.
Dual Residency
Division of property may be more complex if you and your spouse are legal residents of more than one state, especially if one state is a community property state and the other follows the standards of equitable distribution for divorces. Talk to an attorney before filing for divorce. Higher wage earners typically benefit more when filing for divorce in equitable distribution states, while homemakers tend to do better in community property states.
Debts
When it comes to dividing marital property, debts are also divided between the two parties. After the court divides the assets, it will assign responsibility for payoff of certain debts to each spouse. Any debts incurred jointly by spouses remain the responsibility of both parties regardless of who made the purchases. Even if the court assigns a particular debt to one party, should that party fail to make the payments, the creditor has the right to collect the payment from the other spouse.
