Worksheet: Division of Property
When couples separate, they must divide their property. Division of marital assets is the most painful part of divorce after child custody and child support. Each state has its own divorce forms to help couples through division of property, but that doesn't make a divorce case easier.
Family law courts look at several factors when dividing property, including the length of the marriage or partnership, the nature of the property, and state law about marital property division. This article gives an overview of state laws and how couples may divide their assets and debts during a separation.
Community Property vs. Common Law Property
Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) are community property states. This means all marital property is the property of the “community" or both spouses. The court divides the property evenly between the parties.
All other states, except Alaska, are common law or equitable property states. The judge determines what is “fair" or equitable when dividing property, meaning the couple could receive an unequal share of property.
Both parties keep their separate property. Separate property is any property owned before the marriage, acquired by gift, inheritance, bequest, or purchased with separate funds during the marriage. Things given from one spouse to the other are separate property.
Divorce Worksheet 1: Dividing Some Property
Petitioner and Respondent are getting divorced. They have their financial assets and debts worksheet on the table. So far, it looks like this:
- Petitioner Separate Property: Car (bought in college), diamond ring (inherited from grandparents), $5,000 (gift from parents).
- Respondent Separate Property: House (owned before marriage), separate bank account with $10,000 balance, credit card (pays off each month).
- Marital property: Respondent's truck (paid from joint account), mortgage (from refinance), sports memorabilia collection.
It's a good start. Now what?
Contested vs. Uncontested Divorce
In an uncontested divorce, the parties agree they are divorcing and want to reach a marital settlement agreement. Uncontested divorces usually involve couples without minor children unless the couple can agree on child support and a parenting plan. A property settlement without children is easier to reach.
In a contested divorce, the couples cannot agree on some parts of the divorce process. Often this involves the property agreement. In community property states and common-law property states, a party's right to marital property depends on how invested they are in the community.
For instance, a spouse receives a part of the other spouse's retirement account for the duration of the marriage. The court uses a complex court order, the Qualified Domestic Relations Order (QDRO) to explain to the retirement plan how to divide the retirement account. If one spouse owns a business during the marriage, the other spouse may receive some of the profits. Let's look at how that works.
Divorce Worksheet 2: Dividing a Truck
Petitioner and Respondent can't agree on the truck. They got it for Respondent, but they've been making the car payments from their joint account. There are 18 more months of payments due. Petitioner thinks if Respondent gets a new car out of the divorce, it's only fair they should, too. Respondent says the truck is a work truck, it gets terrible mileage, and will have to be traded after the divorce for a more efficient and probably used car.
Here's what the judge looks at:
- Both Petitioner and Respondent signed the truck's sales agreement. They're both responsible for monthly payments.
- Respondent drives the truck 90% of the time, primarily for work. Respondent's construction business' name is on the side, and the business (not Respondent) takes a tax deduction for the truck.
- Respondent pays for the insurance policy, maintenance, and fuel from his separate account.
- The monthly insurance, maintenance, fuel, and depreciation cost is about equal to the monthly car payment.
The judge will probably determine that Respondent should keep the truck and have the title signed over to Respondent alone. Petitioner receives reimbursement for one-half the value of car payments made by the joint account.
Types of Personal Property
Not all personal property is separate property. The divorce process includes furniture, artwork, jewelry, and collectibles. Sometimes these are as bitterly contested as the family home or child custody.
Marital property includes antiques or artwork gifted to the couple. Couples often claim that Aunt Maude meant for one or the other to have the Ming vase if they ever separated. There is seldom evidence Aunt Maude said any such thing. Unless the relative in question provides an affidavit stating that one or the other person should have a gift, the couple must argue it out, or the judge will decide. For valuables, the usual solution is to sell them.
Couples with valuable collections, art, or heirlooms they do not want to sell should try to agree on who should have them. Judges are not sentimental enough to argue over who Aunt Maude loved more when she gifted the Ming vase.
Divorce Worksheet 3: Dividing a Sports Memorabilia Collection
Petitioner and Respondent met thanks to a passionate love of Swedish curling. They have a remarkable collection of curling memorabilia, artifacts, and collectibles. Their prized assembly of curling stones was appraised at more than $10,000. Now they're not sure what to do. They don't want to break up the set, but they each have their favorite stone, sweeper, and jersey.
The judge gives them several options:
- They can keep the collection intact. One will keep the entire collection and pay the other the full appraised amount out of their share of the marital assets. The judge will decide who gets the collection based on the total property division. The judge warns them it may come down to a literal coin flip.
- They can keep the collection intact and arrange an auction. Once they sell it at the best fair price, they split the proceeds. Or, they may each take their favorite collection piece and sell the rest.
- They may each take one piece of the collection alternately until it is gone. They can rebuild their own new collection from that base.
If they cannot decide, the judge will probably opt to sell the collection and split the proceeds. This is the only way to end the marriage without further incident.
Deeds, Mortgages, and Notes
Dividing the family home causes heartbreak. This is especially true when one spouse owned the house before the marriage, and the couple refinanced it during the marriage. If the couple did not retitle the deed, the divorcing couple is in the awkward position of having one name on the deed and two names on the mortgage.
In a contested divorce, the partner whose name is on the deed can demand that their ex-spouse move out while insisting they pay their half of the mortgage. These situations are worse if there are minor children involved. If the parent with the home is not the custodial parent, negotiations can break down into endless wrangling over parenting time, spousal support payments, and court orders.
These cases are rare, but they happen. The best way to avoid them is to get sound legal advice before marriage or early in the marriage before it's too late to put a spouse on the deed.
Divorce Worksheet 4: Dividing a House
Petitioner and Respondent can see the light at the end of the divorce tunnel. They hashed out the sports collection, the bank accounts, and even the life insurance and retirement plan. All that's left is the house. They're in a real pickle with the house. Respondent owned the house long before the marriage and always meant to put Petitioner's name on the deed. They tried once, but the Recorder's office sent it back with some error, and they forgot. They refinanced the house when the property's value went up. The bank put both their names on the mortgage.
Now who gets to keep the house? Who has to pay the mortgage?
- Since joint account funds paid the mortgage, Petitioner receives reimbursement for the amount paid.
- Respondent could keep the house in a community property state, and both parties would have to make their mortgage payments. In an equitable distribution state, the judge might order the parties to refinance the house a second time, in Respondent's name alone, since an equitable division would not order Petitioner to pay for a home that was not theirs.
- If Respondent does not want to keep the house, Respondent can sell the house and keep the proceeds; Petitioner is not entitled to any profit.
Dividing houses where one party has the title, and both are on the mortgage may take months or years to resolve. Fortunately, it seldom happens.
||To Your Partner:
Dividing property is stressful, even with a worksheet to show you what to do. A skillful divorce attorney in your area can help make the process less confusing. Before you sit down with a stack of papers, find legal help near you.