What State you live in determines the rules for dividing assets
Community Property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), each spouse is entitled to one-half of all the property acquired during the marriage.
Equitable Distribution states – Various factors are taken into account, including the financial situation of each spouse when dividing assets in these states. Courts divide the marital assets in a fair and equitable manner, although the division is not likely to be equal.
Separate Property, (also known as non-marital property) is not included in property division in community property states. Separate Property includes property or businesses owned prior to marriage or living together, gifts and inheritances from family that have not been commingled with community assets (such as in a joint bank account), or pension proceeds of either spouse that vested prior to marriage.
When the parties cannot agree on dividing assets, courts will commonly take into account the length of your marriage, the work history and job prospects of each, the abilities of the spouses to be self-supporting, the physical and mental health of each, the expense of any children, and the source of particular assets. The court will then fashion a divorce settlement that approximates a fair division.
Homes, Rental Property, Brokerage Accounts, Bank accounts – Checking, Savings, Christmas Club, CDs, etc., Retirement and Pension Plans, Closely-held Businesses, Stock Options, Country Club memberships; Annuities; Life Insurance, Deferred Compensation, Restricted Stock, Tax Refunds, Professional Practices, Licenses and Collections.
- any property that was owned by either party prior to the marriage
- an inheritance received by either party before or during the marriage*
- gifts received by either party and given by a third party (your Father gave you his restored antique car)
- awards received from a lawsuit for personal injury
* Caution should be exercised regarding property that you may have co-mingled with your spouse. Inheriting money and depositing it into a joint account with your spouse or property that you have re-titled with your spouse’s name on it could cause the property to lose its separate property status. In many States any increase in the value of your separate property is considered marital property and subject to be divided.
- The length of the marriage
- The income or property brought into the marriage by each spouse
- The standard of living established during the marriage
- The age and physical/emotional health of each spouse
- The income and earning potential of each spouse
- The financial situation of each spouse when the divorce is finalized
- The contribution of a spouse to the education, training or earning power of the other
- The needs of the custodial parent to maintain the lifestyle for the children
Debts get divided as well, although the treatment of marital debt is handled differently between Equitable Distribution and Community Property.
In the event you and your spouse will be unable to agree on the value of one or more assets, a third-party appraisal will be necessary. Any prior valuations or appraisals will be helpful to the process, so if you have those documents you should produce them. In divorce settlements, it is typical that the partner with more resources wants less disclosure and the other partner wants more disclosure.
Assets that occasionally get overlooked can include: stocks and bonds, IRAs, Pension and retirement accounts (past and present), certificates of deposit, money market accounts, items from your safety deposit box, insurance policies, business partnerships, company-sponsored stock options and the like.
As emotions are likely to be running high through this phase, you should be mindful not to get too focused on or attached to any one particular asset as one you absolutely have to have, or that you deserve; as fighting your spouse over the artwork over the sofa can end up costing more in legal fees than its worth. You will have to let go of certain property to achieve a good divorce settlement.
Sometime before the property settlement agreement is finalized, you’ll want to determine what tax implications will arise from selling or dividing your marital assets. In some cases capital gains taxes can be such that the parties look for a different settlement solution. A CPA or tax attorney can be very cost-effective here.
If you are involved with large pensions or retirement accounts in the marriage, you will require an analysis in order for it to be valued correctly for distribution to each party. We strongly suggest you get your own evaluation. Your lawyer (or your spouse’s lawyer) will get you an evaluation by contracting with a third-party provider, likely at significant cost. We suggest you have your own done for a fraction of the cost, just so you know if someone else’s evaluation is slanted away from you, if you know what we mean. For $299 you can have an accurate analysis to use as a base. This stuff is complicated, so you need to be on your game. Contact our partners at the QDRO Desk. It will be the best three hundred bucks you ever spent.
Take a sheet of paper, and turn it sideways. Make three columns – one for assets you consider jointly owned and the other two columns to list possessions you consider owned by each spouse. On the back of your asset sheet, list stuff that has little value other than sentimental. Quickly agree on who will take what low-value stuff. Put a name or initial by each item. If there is a dispute about an item on the back side of the paper, it belongs on the front side.
Put dollar values on all items. For home, property or business assets, agree to have a professional provide estimates. For household furnishings, work from purchase prices and age. For antiques, get them appraised. Pensions and investments may require an actuary and accountant respectively. Subtract unpaid mortgages from property value to arrive at true net values.
In most states, and in most cases, if you and your spouse can agree on how to go about the division of property in your divorce, whether it follows your state’s guidelines or not, the court will approve your divorce settlement agreement. It is important to understand that the parties can structure their divorce and divide their assets in most any fashion that an agreement will allow. Issues that remain unresolved will be decided either by mediation or by the court.
If and when the parties agree, the attorneys will draft a divorce settlement agreement that will include the various stipulations and agreements. This document should specifically detail who gets what property. As in any legal document, you will want to review the document to make certain it is in order. Once it is signed and a permanent part of the final divorce decree, it is set in stone, and you will need a chisel to change it later.
The following states take marital misconduct, especially economic fault, into consideration when dividing marital or community property or in reimbursing the marital or community estate: Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin.¹
Just as soon as the divorce settlement is approved or the court finalizes the divorce, you will want to complete the details of your property transfer. We suggest you demand that any transfer papers be signed as a part of the agreement before it gets finalized by the court. Sometimes a bitter newly-divorced spouse can drag the transfer out to spite the other. Have your ex-spouse sign any deeds, stock transfers or bank account forms that will be necessary to transfer marital property into your name; determine what payments need to be made to fulfill your end of the property settlement agreement; begin the process of refinancing property if that is a part of your settlement agreement; and release your name on the title to any property your ex-spouse is receiving. Your first inclination after its over is to distance yourself emotionally from the experience. Do not. Cross the T’s, dot the I’s, and don’t leave any loose ends. THEN you can relax. Unless yours is a Tiger Woods-sized divorce settlement, it should not take very long to complete. The longer you wait, the more difficult it will be to complete your divorce settlement and move on.
¹American Bar Association, Family Law Quarterly, Winter 1998, Tables Summarizing the Law in Fifty States.