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Behind child custody and alimony, another hotly contested part of divorce is deciding who gets what; dividing the property brought into the marriage as well as what you purchased jointly. Property covers both real property, such as your home, and personal property, such as household items or cars. Courts use many factors in deciding property division issues and final orders.
State laws generally govern property division issues, and vary by state. State laws cover two property division methods, community property and equitable distribution. Know the basics of property division and you’ll be ready to work through this important issue in your divorce.
Community Property Division
In community property states, each spouse is generally entitled to half the property acquired during the marriage. This is the community property.
Not all property is community property. Spouses may have and keep their separate property. ”Separate property” typically includes:
- Property or businesses you owned before marriage
- Gifts and inheritances received by you
- Pension proceeds that vested before marriage
Ten states have community property laws. Alaska law allows couples to enter into community property agreements or a community property trust.
In most other states, courts divide a couple’s assets in an ”equitable” (fair) manner, called equitable distribution. Equitable is what is fair to both spouses, and fair may not mean equal.
State laws give the factors courts use in deciding what is “equitable.” Generally, factors include:
- Marriage length
- The work history and job prospects of each spouse
- The physical and mental health of each spouse
- The source of particular assets
- The type of assets, and liquidity of the assets
- Whether or not one spouse should keep the family home, or the right to live there for a time
- Tax considerations
Property Settlement Agreements
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 a “marital settlement agreement” (MSA), depending on your state’s laws. Detailed lists of who gets what are included in this agreement.
Many states’ laws spell out that a voluntary property settlement is preferred to having the court decide those issues. There’s no way to predict or guarantee how a court will decide property division issues, so many couples prefer to work out a property settlement on their own.
Do read the property settlement agreement carefully, and ask your lawyer about anything you don’t understand. Once an agreement is signed and approved by the court, it’s likely be difficult and expensive to change.
Next: Breaking Down Property Division Issues