As if the decision to divorce wasn't tricky enough, now you must determine how to divide your assets and debts. This article should help you understand the basics of property division in a divorce, along with some tips on how to make the process easier for both spouses.
In every divorce, couples must divide marital property and debt before the judge will grant the request for a divorce. Couples have two choices: work together to determine what property each spouse will take away from the relationship, or ask the court to decide for you.
If you live in a community property state, the court presumes that any assets (or debts) accrued during the marriage belong equally (50/50) to both spouses. If you have property that belongs to you, whether you brought it with you to the marriage, or you acquired it alone during your relationship, you'll need to ask the court to award the separate property to you.
In equitable distribution states, the court will divide marital property fairly between the spouses, which doesn't always mean a 50/50 split. The court will categorize the property as marital or separate before the judge awards any portion to either spouse. If you have separate property, you'll need to prove your ownership with receipts, witnesses, or any other evidence.
There's no doubt that a judge won't understand your family's circumstances as well as you do. If you'd like to keep control of how you split your assets and debts in your divorce, it's best to work with your spouse, rather than letting a court decide.
One of the easiest ways to start the property division process is for each spouse to create a list of assets and identify which spouse should receive it in the divorce. When you're both finished with your list, you can come together to compare. If you have a dispute, work together to resolve it and determine who should get the property.
It's important to be transparent through the property division process. Both spouses must identify all assets that they acquired throughout the marriage, which includes bank accounts, insurance policies, vehicles, retirement accounts, pensions, real estate, recreational vehicles and equipment, and anything else that holds value.
If you agree to a property settlement and later find out that your spouse didn't disclose an asset, you can ask the judge to reopen your case to reevaluate the property division. In addition to potentially losing assets later, the guilty spouse may also face fines or penalties from the court if the judge believes your ex intentionally failed to disclose or hid information the asset. Honesty is always the best policy when it comes to disclosure.
Another important step is to determine what the property is worth. Generally speaking, courts will accept the fair market value (FMV) of each item, which is what you can get for the item if you sell it on the open market today, not what you paid for it.
Try to agree on a value for each asset worth more than a specific amount—say, $100 or $500. There are some useful websites that can help you value certain property, such as Zillow.com or Redfin.com for real property, and Kelly Blue Book for vehicles. For more difficult or complex valuations, like of a business or antique collectibles, you may need to hire an appraiser.
If you can't agree on a value for a specific item, you may each have to hire independent appraisers, and ask a judge to pick from one of the two valuations.
Whether you're in a community property or equitable distribution state, if you own separate property, it will remain in your possession. That said, you must first categorize and agree that the assets were separate before you can move forward. Each spouse should identify the owner of each asset.
If there is a disagreement about whether an asset is marital or separate, the person claiming the item will have to prove to a judge that it's owned separately. You can do this by showing the date of purchase, where the funds came from to purchase the item, and how the item was kept separate during the marriage.
Marital debt is not excluded from property division in a divorce. If you acquired joint debt during your marriage, like a mortgage, car payment, or tax debt, you will probably have to split that between the two of you during your divorce. If you owned a credit card in only your name, and you never used it for marital purposes, like groceries, you may be solely responsible for the amount owing.
Remember, while the court can assign the debt to either (or both) spouse, it can't change the contract you have with your creditors. For example, if the judge requires your spouse to pay off a joint credit card, but your ex fails to pay the monthly payment to the creditor, the credit card company can (and will) still come after you for payment. Unless you want your credit score to be in jeopardy, you'll need to pay it, and ask the court for reimbursement from your spouse later.
If you and your spouse can agree on all of the terms of your property and debt division, you can create a property settlement agreement to present to the judge. Your agreement should list each asset and debt, the owner, and the value. If you want to be sure that you're not making a bad deal, you should ask an experienced attorney to review the agreement before you sign it.
In most cases, the judge will honor your agreement. However, if a party without a lawyer agrees to a property settlement that awards more than half of the property to the other spouse, the judge may want to investigate before approving it. No court wants to see a spouse walk away with an unfair distribution of property.
If you and your spouse can't reach an agreement on property and debt division, you can eliminate the issue by selling the asset and dividing the profits. For example, in most divorce cases, the couple will sell the marital home, subtract the mortgage debt, and split the proceeds. However, if you can't decide what percentage of the profits each spouse should take, you may have to ask a judge to decide for you.
If you're going through a divorce, and you have concerns about property and debt division, you may want to seek legal advice from an experienced family law attorney in your area.