Overview of Property Division
Where you live will impact how property is divided in your divorce. Although states may have their own rules regarding property division in divorce, there are two main approaches—a community property and equitable division approach.
A small number of states follow community property rules. Community property states include: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, all marital property is divided equally between the spouses in a divorce. This means that you and your spouse will each take 50% of your marital assets and 50% of your marital debts upon divorce. Separate property is not subject to division in a community property state.
The remaining states, including Indiana, follow an equitable division approach. Under an equitable division model, a judge will divide a couple’s joint property fairly or equitably, but not necessarily equally. For example, a spouse with a lucrative career and a looming future inheritance may receive a smaller share of the marital estate in a divorce.
A critical analysis in a divorce is whether property is separate or jointly owned, also called “marital property.” A judge won’t divide a spouse’s separate property. However, separate property can become marital if it’s commingled or mixed with marital property. For example, an inheritance may lose its separate status if the funds are used to purchase a marital home or are held in a joint bank account. Also, if you come into your marriage with a car but you use marital funds to repaint, maintain and make payments on the vehicle, the car is now considered a commingled asset, and no longer just your separate property.
In one Indiana case, a judge awarded one-half of the husband’s inheritance to his wife. The court justified its award of separate property on the fact the husband had put the funds in a joint account he shared with his wife. She and he were both co-signers on the account and together had managed his parents’ trust. Because of these actions, his once separate property became marital property and subject to division in his divorce.
Understanding the Court Process
The quickest and simplest property cases are ones where spouses can negotiate their own settlements. If you and your spouse are able to reach a property division agreement on your own or with the help of a mediator, you’ll simply submit your agreement to a judge for review and approval. When spouses can’t agree on property division, a judge will have to decide the matter at trial.
Each spouse has to submit preliminary financial disclosures early on in the divorce process. Your financial disclosures should account for all assets, debts, property, income and expenses. For example, your financial disclosures should list all income sources and monthly expenses, including credit card bills, mortgage payments, car payments, gasoline expenses, utilities, student loan payments, personal care expenses, etc. This information provides a judge with your complete financial picture and can help the court come up with an equitable property award.
In addition to financial disclosures, you and your spouse may take each other’s depositions, hire experts, and submit discovery requests all before attending trial. You and your spouse will likely have to testify at trial, including providing information about your marital assets and debts. If you have a complex marital estate, family business or high-value assets, you may also want to use experts at trial. For example, a business valuation expert, forensic accountant or real estate appraiser can help a judge get an accurate value of your marital estate.
What Factors Will a Judge Consider When Dividing Property?
In certain cases involving only a few property items, Indiana law allows a judge to award a money judgment instead of a property split. These types of money awards are only for cases where one spouse contributed financially to the college or graduate education of the other spouse.
Normally, judges divide property equally in Indiana unless one spouse can show that an even split is unfair or unreasonable. As an equitable division state, a judge’s overall goal in property division is an equitable or fair split, but an even split is presumed to be fair unless shown otherwise. Specifically, a judge will consider the following factors when dividing property:
- each spouse’s contribution to the property, regardless of whether the property is income producing
- how and when the property was acquired
- whether the property was acquired through an inheritance or gift
- each spouse’s financial circumstances at the time of divorce
- each spouse’s current earnings or earning potential
- each spouse’s financial conduct during the marriage, including dissipation of assets, and
- any tax consequences of property division.
In another Indiana case, the judge split the couple’s marital estate in half. Moreover, part of the 50/50 split included the court’s award of one-half of the husband’s inheritance to his wife. The wife’s limited earning potential, and lack of family resources compared with the husband’s superior earning capacity justified an even split of the marital estate. Although the husband argued that his wife shouldn’t be entitled to his inheritance money, the court disagreed largely because of the wife’s financial circumstances and conduct during the marriage.