Divorce tend to ever get so often complicated, both financially and emotionally. During a divorce couple usually find it difficult to agree on diving assets fairly. Division of property and debt is often a big issue to navigate in a divorce. Hence, in most cases both property and division is divided on 50-50 basis to establish a neutral ground. Assuming that the spouses are on good terms, it is very likely that they both have a different version or idea of what is fairly divided. Now, generally the property or assets includes – real estate, dependent children, income, cars, furniture, investments, and retirement accounts – get divided between the former spouses.
Irrespective of how one chooses to split up their assets, understanding the fundamentals of legal regulations can help one make informed decisions through the divorce process. Let us understand more in this article and answer the few basic questions in relation to the same.
During a dilemma couples can always approach the Court, who will divide the asset for you. Now, this is done under two schemes:
- Community Property; and
- Equitable distribution. “The main difference between community property and equitable distribution is that in community property states, there is an absolute 50-50 split of all property acquired during the marriage. In equitable distribution states, more assets may be considered “marital property,” but the split is not necessarily 50-50.”
The kind of division is usually dependent on what kind of state you reside in.
- Community Property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. “This means that property acquired during the marriage is community property (although there can be exceptions). During a divorce, community property is typically divided evenly, and separate property is kept by its owner.”
- Equitable Distribution: All other states normally adhere to equitable distribution. “A judge (or the couple themselves) will decide what is equitable, or fair, rather than simply splitting the value of the property in two. In practice, this may even mean that two-thirds of the property goes to the higher-earning spouse, with the other spouse getting only one-third.”
It is important to point out that when a Court of law divides the assets or property among the couple, it does not necessarily mean that they physically split the said asset or property. The Court usually adds up the total value of the marital estate and accordingly grant each partner a percentage. How each spouse secures that amount may mean selling the house or transferring part of an IRA or buying out a spouse’s interest in a company.
What is marital property?
Marital property comprises of all the property both spouses had acquired throughout the course of the marriage. The property title does not matter in this case. For example, if a couple bought a home, but only the husband’s name was on the deed, the wife would still be entitled to some of the value of the home if they were to get a divorce.
Will pension be considered as marital property?
Yes. Pension plans, 401ks, and any other retirement plans are deemed as marital property. The same will be divided by the court of law.
How does the court determine what is equitable?
The court takes into consideration certain criterions to deem a property equitable.
- The income of each spouse,
- How many years the marriage lasted?
- Property of each spouse,
- In cases where there are children – certain decisions are taken for the benefit of the custodial parent,
- Retirement benefits of each spouse if any.
Protecting oneself of debt that the other spouse is responsible for.
One can always call up or write to creditors and request them to close any joint accounts that exists at the time of the marriage. If not, you will be accountable for the current or any future debt of such spouse.
Can the spouses divide property on their Own?
Yes. If couples are on friendly terms and are able to work together and negotiate on equitable terms. The same can become official by signing or creating a settlement agreement. For couples who want to avoid the mental stress that comes with the divorce process, one can always opt for mediation settlement or arbitration. Courts often encourage the divorcing spouses to involve a low-cost conciliation method.
Since mediator acts as a neutral third party, it helps the couple to solve their issues amicably. The divorce proceedings in itself function smoothly.
Mediation can occur in person or online. During mediation, the mediator will guide the couple through the topics that need to be addressed and suggest. The mediator doesn’t provide legal advice or make any decisions. If the spouses reach an agreement on how to divide their property and debt, the mediator will normally create a property settlement agreement for them to sign and submit to the judge.
This article provides general information about the subject. For more information or specific legal advice contact Layman Litigation. Merely, receiving this information does not make you a client to our office.