Donna Caruso Baccarella
May 06, 2015
Tampa ,FL 33607
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During the divorce process, the courts will help you decide how assets and debts will be divided between you and your spouse, both real property, like your house, and personal property, like your cars and furniture. This is a “property division order.” One of the most important things to know when it comes to dividing up the assets of a marriage is knowing whether you live in a ”community property” or an ”equitable distribution” state.
In either scheme, there a number of factors and variables that effect a division of property, which are usually set out in detail in the various states’ divorce laws. So, if you’re involved in a divorce, it is critical that you understand the property division laws in your state and the court decisions interpreting those laws or consult an experienced divorce attorney.
Community property is all property jointly owned by the spouses or acquired during marriage by the labor, efforts, or skill of either or both spouses. However, careful records and the way title is held on property can refute the assumption that all property acquired during the marriage is community property.
Property “owned” by only one spouse usually won’t be part of the property division in the divorce. Cars, boats and houses that have only the name of one spouse on them may be considered the separate property of that spouse.
Separate property typically includes:
Community Property v. Separate Property
In some states, there is a presumption that property acquired during marriage by either husband or wife or both is community property. In other states, property in the possession of either spouse during the marriage is presumed to be community property, and the spouse who claims that such property is “separate property” has the burden of proving it.
Just as there are ways to get around the assumption that something is community property, there are ways to get around the assumption that something is separate property.
Personal gifts given at Christmas, anniversaries, etc., are assumed to be the property of the spouse who received the gift, but if a woman’s husband gives her an expensive necklace that is treated by the couple as more of a jointly owned investment than part of her personal wardrobe, the necklace might be community property.
It is, therefore, important to document the circumstances under which all valuables were acquired, even up to the date that your divorce is final, because often all property acquired up to the date of divorce will be treated as community property. However, some laws use the date of separation as the cut-off date for determining if certain property is community or separate property.
Sometimes, separate property can become community property through “commingling,” which is when separate property is mixed together with community property in such a way that you can’t tell the difference between the separate and the community property. For example, commingling might occur where money given to one spouse as a gift is deposited into a bank account jointly owned by both spouses and then used to buy community property, like home furnishings.
Dividing the Property
Most community property states allow the court to make an “equitable” division of community property, that is, a property distribution that is “fair” to both spouses. In these states, the courts will consider various factors when making the division, such as each spouse’s current income and future earning capacity. Some, but not all, will consider a spouse’s fault in causing the divorce or misconduct or fraud in dealing with the parties property or assets during the marriage.
You need to carefully read the community property laws in your area to determine if an “equal” or an “equitable” distribution will be made in your case, and if your separate property can be included in the property distribution.
Although each spouse is entitled to half of the assets, the form may differ. For example, there is no way for you to split your home physically in half. You may be required to sell your home and split the proceeds or the spouse that wishes to stay in the home may have to buy out the one who does not.
If you do not live in a community property state, the courts will follow a model of equitable distribution. Equitable distribution does not divide assets evenly but instead divides assets according to what is deemed fair to both spouses.
In deciding what’s “equitable,” a court will commonly take into account:
Regardless of your state’s laws, it is always important to keep good records and to document everything that you can. As soon as possible, get your attorney a list of all assets and any supporting documentation that may be required, including copies of title, written agreements, and current appraisals.
It’s very important that you make a complete list of all property belonging to both you and your spouse. It’s vital not to hide assets, because anything left out of the property settlement will have to be dealt with later.
Many lawyers have property checklists designed to jog your memory regarding property you may have forgotten about.
Assets which people sometimes forget to list include:
When you and your spouse can’t agree on the value of a particular piece of property, it may be necessary to have a professional appraiser — such as a real estate broker — put a value on the property for you. You’ll want to provide your lawyer with any information you have regarding the value of property, including prior appraisals and assessments from tax collectors and so forth.
Many divorcing couples make the mistake of fixating on one piece of personal property, such as an art object or something else of sentimental value, and spending many times the value of the object in arguing over who will own it. It’s almost always better to compromise between the two of you as to how to divide your personal household possessions, unless your lawyer finds some reason to get involved.
Generally, there is no gain or loss for federal income tax purposes on the transfer of property between spouses when the it is “incident to the divorce,” which means that the transfer:
A transfer is ”related to the cessation of the marriage” only if:
Any transfer that is not pursuant to a divorce or separation instrument, or any transfer that occurs more than six years after the cessation of the marriage, is presumed not to be related to the cessation of the marriage and might be taxable.
Nonetheless, you’ll want to consult with a tax lawyer or certified public accountant regarding any possible tax consequences of holding, transferring or selling property as part of the divorce process.
If you and your spouse can agree on how to divide your assets, whether it follows your state’s guidelines or not, your lawyers will write up a formal agreement called a ”property settlement agreement” or ”separation agreement.” Detailed lists of who gets what will be included in this agreement.
Read the property settlement agreement carefully, and ask your lawyer about anything you don’t understand. Once you’ve signed the agreement and it’s been approved by the court, it will be difficult and expensive to change.
As soon as the property settlement is approved or the court finalizes the divorce, you’ll want to take care of the details of property transfer:
While it may be the last thing you want to do, taking care of these details will save future trouble and make it easier to gain closure on this chapter of your life.