When you're navigating the end of your marriage, one big issue will be dividing your property. Whether you plan to get a do-it-yourself divorce or hire a lawyer, understanding the basic legal rules can help you make informed decisions as you go through the process.
When it comes to divorce and property, you may think the most important question is who gets what in the divorce. Of course, that's the bottom line at the end of the process. But the first question is whether you and your spouse can agree on how to split assets and debts rather than have a judge decide for you. That's because the cost of divorce shoots way up when you go to trial.
We'll talk more below about how to prepare a divorce property settlement—including how to get help when you're having trouble agreeing with your spouse, and what happens after you've signed an agreement. For now, you should know that as long as both you and your spouse agree, you're free to come up with any way of dividing your property that you want—regardless of how a judge would decide on the issue under your state's laws. Still, the judge might not approve your agreement—a necessary step before getting your final divorce—if it seems unfair.
Even if you hope to avoid trial by working out a property settlement, you should understand the basic legal rules of property division. Those rules will be in the background when you're negotiating with your spouse, because they'll govern a judge's decision on the issue if it comes to that.
The rules on property division in divorce are based on state law, and there are some significant differences from state to state. But the general principles are similar across the United States.
In most (but not all) states, only your marital property will be divided in divorce, while you and your spouse will each keep your own separate property. But how do you know which assets are marital and which are separate?
As a general rule, marital property includes any money or other assets that either spouse earned or acquired during the marriage—unless they both signed a written agreement (such as a prenuptial agreement) to keep some or all of that property separate.
Separate property typically includes:
There are a few differences in how states define separate and marital property. In some states, for example, the rule on property "acquired during the marriage" doesn't apply after separation. That means that once a couple permanently separates, each spouse's earnings are their separate property, even though they're still legally married.
The distinction between separate and marital property can sometimes get complicated, such as when couples mix ("commingle") separate and marital funds in a bank account, or when they use money from a joint account to make improvements or mortgage payments on a house that one spouse owned before they got married. But the distinction won't matter in a few states, where the laws allow judges to include all of a couple's assets and debts (both separate and marital) in the property division.
Most states use a rule known as "equitable division" when judges divide marital property in divorce. Basically, this means that a couple's marital assets and debts will be distributed between them in a way that the judge believes is equitable (fair) under the circumstances in the case. It does not necessarily mean that the property will be split equally.
Although the decision of what's fair in your case will ultimately be up to the judge, state laws do provide guidelines. Some of the typical factors judges must consider include:
Nine states in the U.S. use the community property rules for determining the ownership of married couple's assets and debts:
In those states, both spouses share joint ownership of all marital (or community) property. Historically, the laws in these states presumed that community property should be equally divided between the spouses. But several of these states have been moving away from that equal division requirement. For instance, Texas and Arizona simply call for a fair division of community property. And while both California and Nevada call for an equal division, Nevada allows an exception when the judge finds a compelling reason for an unequal but fair distribution of the marital property. (Ariz. Rev. Stat. § 25-318; Cal. Fam. Code § 2550; Nev. Rev. Stat. § 125.150; Tex. Fam. Code § 7.001 (2022).)
A few of the equitable division states—including Florida, Kentucky, and Tennessee—allow couples to opt into the community property system or identify certain assets as community property, often by creating a special trust.
Of course, when we're talking about property division in divorce, that doesn't mean physically splitting each asset between the spouses. Usually, judges will assign each spouse a percentage of the total value of all the couple's marital property (sometimes called the marital or community estate), minus their debts. Then, the judge will distribute assets and allocate debts so that each spouse's share of the estate comes up to the assigned percentage. Couples typically go through a similar process when they're working out a property settlement agreement.
But what if a couple owns one piece of property—like a house—that's worth far more than all of their other assets combined? We'll talk below about different ways of dealing with a house in divorce. But this problem can also come up when couples have two valuable assets that don't balance each other out (like retirement accounts), and there aren't enough other assets to make up the difference. One solution is to have the spouse who gets the more valuable asset make what's known as an equalization or equalizing payment to the other spouse. (Despite the name, this kind of payment may also be used in states where the property division isn't necessarily equal.)
Obviously, the cash for an equalizing payment must come out of the paying spouse's separate property, share of the marital property, or a combination of the two. When that spouse doesn't have enough cash to cover the amount, the judge might order future installment payments. But if you're considering a settlement agreement with this type of arrangement, you should be aware of the potential pitfalls and speak to an experienced divorce lawyer first.
If you own a house with your spouse, it may very well be your most valuable marital asset. That fact—along with the emotional connection to the family home, especially for children—means that dealing with the house will often be the most difficult part of property division. It's not just a question of who gets the house in the divorce, how the other spouse is compensated for their share of the equity, and whether you should move out during the divorce process. Decisions about the family home are also closely linked to other issues in the divorce, such as child custody, child support, and alimony.
There are several different ways of addressing what will happen to your house after divorce, including:
If the house is one spouse's separate property, that spouse will usually keep it. But if marital funds went to mortgage payments, renovations, and repairs, the other spouse could be entitled to part of the increase in the property's value during the marriage.
As a general rule, final divorce judgments must include orders dividing the couple's marital property and assigning responsibility for marital debts. But depending on your situation and where you live, you might be able to get what's known as a "status-only" divorce—meaning the judge will issue a divorce decree that legally ends your marriage but doesn't include orders on the other issues in your divorce, including the distribution of your marital property or debts. For example:
Even if you're able to get a divorce without a property division in your state, this could lead to unforeseen tax and other financial consequences. But there might be ways of preventing these outcomes, and a status-only divorce would allow you and your ex to get on with your separate lives (and maybe new marriages) while you continue trying to resolve your property disputes. So you should speak with an experienced divorce lawyer in your state if you're considering this option.
If you and your spouse haven't been married long and own only a modest amount of personal property, it might not be that difficult to agree on how to split it between the two of you. But if you just can't agree—or if you own complicated or valuable assets together—you'll probably need help.
There are three basic sources of assistance with property settlements:
Whether you get professional help with a property settlement or work out an agreement on your own, you'll still need to take some preliminary steps:
You must submit your signed, written settlement agreement to the judge for approval. If you're filing for an uncontested divorce, you'll typically include the agreement with all of the other divorce paperwork that you file to start the process. Otherwise, you'll submit the agreement at some point before your final divorce hearing. The judge may ask you a few questions to be sure that you understand the provisions in the agreement and that you signed it voluntarily, without being pressured or coerced. The law in your state might include specific guidance for approving property settlements, but judges usually approve these agreements unless they're clearly unfair.
If you took on joint debt during your marriage—like a mortgage, car payment, or tax debt—you'll probably have to split the responsibility for paying that debt when you get divorced. The same is true of credit cards that are in both your names or were used to buy things for the two of you.
There's one important thing you should remember when you're dividing marital debts in divorce. Even when your divorce agreement or judgment assigns a debt to one spouse, that won't change the contract you have with your creditors.
So, for example, say your divorce judgment requires your spouse to pay off a joint credit card. If your ex misses payments, the credit card company can—and will—come after you for payment. Or say your divorce judgment orders you to pay off a credit card, but your ex continues to use the card after the divorce. In situations like this, you'll need to pay the bills and then go back to court and ask the judge to order your ex to reimburse you.
If at all possible, the best way to avoid this kind of problem is to close all joint accounts when you're separating or are planning a divorce. And if your settlement agreement (or the divorce judgment) will require you to pay off a credit card debt, make sure that your spouse's name is removed from the card.