Divorce Property Division FAQs

Divorce property division is the process of dividing assets and liabilities between spouses. This process involves determining who gets what regarding real and personal property, bank accounts, investments, debts, and other shared assets.

When a couple gets divorced, one of their main concerns is what to do with shared property. Who gets the house? Who gets the dog? The answer depends on the divorce laws of the state where you filed for divorce. It also depends on the ability of the spouses to reach an agreement.

Q: What's the Difference Between Marital and Separate Property?

A: Marital PropertyMarital property refers to assets acquired during the marriage. This includes all types of property, both tangible and intangible. Marital property includes property acquired by either spouse, along with joint purchases.

Separate Property: Separate property refers to assets acquired before the marriage. This can include gifts, personal injury awards, inheritance, and pension proceeds obtained during the marriage. Prenuptial agreements are a great tool to outline separate property prior to getting married. A prenuptial agreement prevents questions of ownership in the event of a divorce.

Be aware that a spouse's separate property can become marital property. Couples who commingle their funds can change the classification of assets. For example, inheritances are separate property. However, if you use the funds from an inheritance to pay for a mutual debt like a mortgage, that inheritance could be marital property.

When you purchase or maintain items using a mix of separate and marital property, a court will likely consider it marital property. If you commingle the property, it can convert into community property.

Q: What Happens to Property in a Divorce Case?

A: In every state, divorcing couples have the option of entering a settlement agreement. If the couple is in an uncontested divorce, they can reach an agreement on all material issues without the intervention of a court. Settlement agreements outline the terms of property division, child custody, and spousal support agreed to by the couple.

When divorcing couples cannot amicably decide how to divide marital property, the question may go before a judge in a family law court.

State laws approach property division in two ways:

  • Community Property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states, as is the U.S. territory of Puerto Rico. This means that property acquired during the marriage is community property. In community property states, courts divide marital property evenly while the separate property stays with the owner.
  • Equitable Distribution: All other states (except Alaska) follow equitable distribution. A judge will decide what is equitable or fair rather than simply splitting the value of the property in two. This could mean the unequal division of property in equitable distribution states.

Note that when courts divide property, that doesn't mean the property is literally (or physically) split. A court will add up the total value of the marital estate and grant each spouse a percentage. How each spouse secures that amount may mean selling the marital home, transferring part of an IRA, or buying out a spouse's interest in a company. These are the details of property division that a divorce attorney helps you determine.

Q: What Happens to Debts in Divorce Proceedings?

A: Debts accumulated by the married couple are typically divided along with the marital assets. Each spouse may be responsible for a portion of the marital debts. Marital debts are debts incurred during the marriage, regardless of which spouse's name is on the account. These debts may include mortgages, loans, credit card debt, or other liabilities.

Each state's laws and various factors will determine the specific allocation of debts to each spouse. It's important to note that individual debts are not typically part of the property division. Individual debts are debts prior to the marriage. It may also include a debt incurred by one spouse alone during the marriage. While individual debts are not part of the property division, courts consider individual debts when dividing marital debts. Courts also consider individual debts for calculating things like alimony and child support.

Q: What Happens to Retirement Benefits in a Divorce?

A: Specific treatment of retirement accounts varies depending on the state and type of retirement plan involved. It's important to understand the specific nature of the retirement benefits. Most plans have associated rules or restrictions. Retirement accounts need to be accurately valued to determine their portion of the marital assets. The divorce process divides retirement benefits in a few ways:

  • Offsetting Assets: Sometimes, the value of a retirement account can be offset by allocating other marital assets to the ex-spouse. This means that the ex-spouse would get another asset of similar value to the retirement account.
  • Deferred Contribution: This means that until a specific triggering event occurs, retirement benefits are not distributed. An example would be the retirement of the plan participant. At that point, the benefits accord with an agreed percentage or formula.

It's important to consider the tax consequences of dividing retirement benefits. Certain retirement accounts may lead to taxes and early withdrawal penalties without a QDRO. Consulting with a financial advisor or tax professional can help you navigate this process.

Should I Consult a Lawyer for Property Division in a Divorce Case?

It's advisable to consult a divorce lawyer for legal advice, especially if you have a significant amount of assets or disagreements between ex-spouses. A lawyer can provide guidance on the laws in your state, protect your rights, and help negotiate or advocate for a fair division of property.

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Can I Solve This on My Own or Do I Need an Attorney?

  • You may not need an attorney for a simple divorce with uncontested issues
  • Legal advice is critical to protect your interests in a contested divorce
  • Divorce lawyers can help secure fair custody/visitation, support, and property division

An attorney is a skilled advocate during negotiations and court proceedings. Many attorneys offer free consultations.

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Don't Forget About Estate Planning

Divorce is an ideal time to review your beneficiary designations on life insurance, bank accounts, and retirement accounts. You need to change your estate planning forms to reflect any new choices about your personal representative and beneficiaries. You can change your power of attorney if you named your ex-spouse as your agent. Also, change your health care directive to remove them from making your health care decisions.

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