Family Law

Divorce Property Division FAQ Set I

Q: Am I entitled to part of my spouse's business?

  • A: Generally, an asset such as a business that a spouse owns before the marriage is considered separate property and would be owned by the spouse who started the business. But, if the business appreciates or goes up in value during the marriage, the appreciation value may be considered marital property and maybe divided.

Some states require more than just appreciation during the marriage. For instance, non-owner spouses may have to show they actually contributed to the business, through labor, money or some other contribution before any part of the business or its value will be divided.

The presence of a business can really complicate property division. If you're involved in such a divorce, it might be best to consult an attorney.

Q: Are my employment benefits and frequent flyer miles considered marital property?

  • A: In most cases, the benefits you've earned and accumulated through your employment during the time you've been married are subject to division in a divorce. Your spouse may be entitled to one-half of the value of your pension and 401(k) from the date of marriage until the date of separation or divorce. The same may be true for your unused vacation time and frequent flyer miles.

Q: Can I argue that my spouse earned some of the income from our small business?

  • A: Courts review this type of situation on a case-by-case basis. Commonly, where a married couple has a small business that both help operate, but the couple's joint tax return shows that one spouse (typically the wife) earned no income as a "homemaker," all of the income from the business will be attributed to the other spouse (usually the husband) for alimony or spousal support purposes.

Basically, you can't argue both positions. Either the income is yours, or both of yours. When you take the position with the IRS that it'syours alone, don't be surprised if the court holds you to it.

Q: How do I handle a potential IRS inquiry about tax returns filed by my ex-spouse while we were still married?

  • A: Federal tax law (PDF) includes innocent spouse relief: If you file a joint tax return and later divorce, legally separate or live apart from your spouse for one year, you may be able to limit or even avoid liability if you can prove your spouse caused the tax problems. One item you'll have to prove is that you didn't have any actual knowledge of your spouse's tax violations.

    The innocent spouse rules can get complicated, and you may face stiff fines and penalties from the IRS if things aren't handled properly, so it's a good idea to talk to tax attorney as soon as you get any type of notice or warning from the IRS about your tax returns.

Q: How will my savings account be divided during our divorce proceedings?

  • A:

    In most states, a person's separate property owned before marriage remains that person's property after a divorce, as long as it isn't combined with marital property and becomes untraceable. This is called commingling. Any money put into the account during the marriage will most likely be considered marital property and will be divided.

    However, if you can properly identify the funds and trace their movement back and forth through the account, they should remain separate property that will be returned to you at the time of a divorce, rather thandivided as marital property.

    This can be very difficult where there have been withdrawals from bank accounts by both spouses over time, or where money is withdrawn to pay expenses you and your spouse share. The question then becomes, "Which money was withdrawn?" If that can'tbe determined, it's possible the account will become marital property.

    In general, it's usually best to keep separate property separate, rather than counting on it being returned after the divorce.

Q: If we can't agree on the division of certain household items, will we have to litigate the division?

  • A: Most divorce court judges and lawyers try to prevent people from litigating the division of household items because it oftencostsmore money in legal fees to fight over those items than it would to buy new ones. But if you and your soon-to-be ex can't agree, it's likely you'll need to seek legal help because your property settlement won't be complete until these items are divided.

If the two of you can't agree, it's entirely possible the judge will simply divide them in a manner neither of you like.

Q: If we divorce, will I receive credit for the down payment I made on our house?

  • A: In most states, an asset you owned before the marriage is considered your separate property, so long as it hasn't been combined or "commingled" with marital property to the point where you can't tell what is separate and what is marital. Separate property is excluded from division in a divorce, so you keep it after the divorce.

Instates like these, the equity created in your home by your down payment would probably be your separate property. You'd likely be able to keep at least the amount of the down payment, and maybe even the interest on your down payment, based on the overall appreciation or increased value of the house.

Q: Is my spouse entitled to any of my accident settlement if we divorce?

  • A: In general, payment for pain and suffering in a personal injury lawsuit is the separate property of the injured person. However, the portion of the payment that makes up for lost earnings and expenses resulting from the accident may be considered a marital asset that may be divided between you and your spouse in a divorce.

To avoid this, it's best to keep your personal injury settlement money separate from other money that might be considered marital property.

Q: Should there be an equal division of property in a divorce?

  • A: Many states have equitable division of property laws. This doesn't mean thedivision has to be "equal," but rather the division has to be fair. A court has a lot of discretion in deciding what's fair.

A court looks to several factors when deciding how to divide property, including:

After considering these factors, a judge may not think it's "equitable" or fair to divide the property evenly.

Q: What happens to a couple's property when they divorce, remarry, and then divorce again?

  • A: When parties remarry, the property may once again become marital property and be divided if there's a second divorce. A key factor is the length of the second marriage.As a general rule, the longer the marriage, the more likely it is a court will find that the property is marital rather than separate property.

Q: Will I be entitled to part of the stock given to my spouse as a gift during our marriage?

  • A: Usually, this depends on whether the stock is actually a gift. You may be entitled to a portion of the stock in the property settlement ifthe stock was "given" or transferred to yourspouse as part of your spouse's job-related compensation or salary.

The stock is probably your spouse's separate property, however, if it was given as gift - the person who gave it didn't expect or actually receive anything from your spouse in exchange for the stock.In most states gifts are considered separate, non-marital property and are generally not subject to division in a divorce.

Q: Will I be responsible for my spouse's school loans?

  • A: Generally, a court will divide marital debt equitably, in the same way marital assets are divided. The key factor is fairness. So, if the school loans were made during the marriage and you both benefited from them - for instance, some of the loan money was used to buy food or pay rent- you could have to repay some of the loans.

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