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Divorce Settlement and

Division of Property

In as much as the fifty states have differing divorce laws, one aspect of divorce is fairly uniform. Achieving a divorce settlement and dividing the marital property will be done by one of two methods:

1. Community Property States

HomeIn community property states, each spouse is entitled to one-half of all the property acquired during the marriage. There are nine such community property states. They include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Separate property, (also known as non-marital property) isn't 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 haven't been "commingled" with community assets (such as in a joint bank account), or pension proceeds of either spouse that vested prior to marriage.

2. Equitable Distribution States


In the remainder of the states, courts will divide a couple's assets in an "equitable" (fair) manner. "Equitable" doesn't necessarily mean "equal," but what's fair to both spouses. The question then becomes: What's equitable? Courts will commonly take into account the length of your marriage, the work history and job prospects of each, the physical and mental health of each, the expense of any children, and the source of particular assets, and then fashion a divorce settlement that approximates a fair division.

Full and Accurate Disclosure

In providing a list or inventory of marital and non-marital property it is vital that the inventory be as accurate as possible. Don't count on your soon-to-be ex spouse 'forgetting' about a particular asset. Full and accurate inventory avoids more time and expense later. Typically lawyers have checklists designed to stimulate memories into recall.

Property Valuation

cashIn the likely 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 than its value. You will have to let go of certain property to achieve a good divorce settlement.


Taxes and Divorce

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. See our section on Divorce and Taxes.


General

courtIn 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'll want to review the document to make certain it is in order. Once it's signed and a permanent part of the final divorce decree, it's set in stone, and you'll need a chisel to change it later.


No Loose Ends

Just as soon as the divorce settlement is approved or the court finalizes the divorce, you'll want to complete the details of 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. Don't. 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 settlement, it shouldn't take very long to complete. The longer you wait, the more difficult it will be to complete your divorce settlement and move on.



Questions


Can non-marital property I acquired prior to marriage be divided upon divorce? Answer

My partner and I bought a house together, but never married. Is the house and money we spent on upkeep considered marital property? What are my rights now? Answer

My husband used his inherited money to buy a home before we married and I moved into that home. Since then equity has built up and appreciation has occurred. Some of my money went into improvements. Is any portion of the house marital property? He claims its all his. Is it? Answer

During our marriage I had to use inherited money in a segregated account to pay for joint expenses, with the intent for "us" to pay me back later. Fortunately that happened, and we paid me back, and the money has returned to segregated status. He claims its now marital property?
Answer

My spouse moved out almost four years ago, but we are just now going through the divorce process. The dispute is whether the appreciation and build up of equity in our house is shared right up through the divorce, or did his leaving create a date at which his interests stopped growing? Answer

I stayed home and cared for our children while my husband built a law practice. That practice is a marital asset, right? Answer

I filed for divorce last week and my new husband of 2 months just told me he filed for an annulment today. Which way does this go now? Answer

The soon-to-be ex said he changed the beneficiary on his life insurance policy to his girlfriend. Can he do that? Answer

My husband has an investment account at a brokerage firm, in his name only. That is considered a marital asset, correct? Answer

I signed the settlement agreement. Can I have it changed or corrections made? Answer

Do I have to pay taxes on the divorce settlement? Answer

Does it make any sense to make a verbal agreement with my husband? My gut tells me I should have a marriage settlement agreement in writing. He's insisting we do this privately. Should I? Answer

Answers


Can non-marital property I acquired prior to marriage be divided upon divorce? As a rule, assets owned by either spouse prior to the marriage will remain that spouse's separate property after the marriage ends, and won't be distributed by a court as marital property. Of course, there are exceptions. In some states, courts can define the beginning date of a marriage differently than the actual wedding date (they lived together for years before marrying, etc.). In cases of cash, if one was to commingle it with marital funds, that would re-constitute its status. There can be other cases. Consult your lawyer.

My partner and I bought a house together, but never married. Is the house and money we spent on upkeep considered marital property? What are my rights now.

For the most part, unmarried couples aiming for a settlement agreement have no property rights relative to the other's assets. Effectively, there is no marital property. Without the benefit of marriage, they have no claim or right to support from the other, and really depend on any settlement agreements or contracts they may have entered into during the relationship. Assuming you are both on the deed, you'll each have half-ownership. Not being on the deed can cause difficulty in proving ownership in the absence of a contract. In most circumstances it may be wise to cut your losses, agree to a 'we each keep our own stuff' settlement, and move on. Look at it this way: you don't add to the divorce rate; no legal separation needed; no divorce lawyers; no annulments or any costly divorce processes. You got off cheaply.

My husband used his inherited money to buy a home before we married and I moved into that home. Since then equity has built up and appreciation has occurred. Some of my money went into improvements. Is any portion of the house marital property? He claims its all his. Is it?

No simple answer here. If the property was never re-financed and he can trace back to his having bought the home before your marriage, there's a good chance he can claim that down payment. There is also a chance he can claim appreciation on his investment dollars. Much will depend on how much if any marital money was put into the home.

During our marriage I had to use inherited money in a segregated account to pay for joint expenses, with the intent for "us" to pay me back later. Fortunately that happened, and we paid me back, and the money has returned to segregated status. He claims its now marital property?

This can get pretty complicated, in that you must be able to track the funds movement, and if other funds were added and removed it may be difficult to identify which funds were removed and which were not. Your attorney can guide you through this.

My spouse moved out almost four years ago, but we are just now going through the divorce process. The dispute is whether the appreciation and build up of equity in our house is shared right up through the divorce, or did his leaving create a date at which his interests stopped growing?

Your state laws are going to determine this answer. Some states will create a date, a de-facto date for when the marriage ended (when he left) and others will use the constructive divorce date. However, in any case, his interest at the time of leaving remains, and any appreciation of that interest is his. Check your state divorce laws.

I stayed home and cared for our children while my husband built a law practice. That practice is a marital property asset, right?

You'll need to check your state's divorce and property laws. Some states say yes; others say no. In any case, the law practice is a good indicator of future income, and your contribution allowing him to build the practice can become an ally of yours in a property settlement, maintenance or alimony (spousal support) proceeding. Legal advice is a must.

I filed for divorce last week and my new husband of 2 months just told me he filed for an annulment today. Which way does this go now?

One of you needs to request a dismissal of the other's petition, and if you and your spouse can't agree, one of the judges will. It's best to get a lawyer's opinion on this though.

The soon-to-be ex said he changed the beneficiary on his life insurance policy to his girlfriend. Can he do that?

We presume you have been the named beneficiary. This is another question where it will depend on your state laws. In many cases there is a restraining order issued against the sale or dissipation of assets until the divorce is final. In most states, property acquired through the "labor" of a spouse is usually marital property, so the question is: how does your state view this? Chances are, the money or assets used to purchase the insurance were from marital assets or cash, making much or all of it marital property and therefore divisible. In general, one cannot remove the beneficiary if that beneficiary is a spouse without court approval.

My husband has an investment account at a brokerage firm, in his name only. That is considered a marital asset, correct?

That's going to depend on certain answers. Was there an account before you got married? Was the account started with marital property (cash or securities from joint income)? Are there any inherited securities in the account? If the account was started during your marriage, with money or securities that you shared, it's in all likelihood a marital property. If it began before your marriage, it's likely that at least a portion of the value is non-marital property.

I signed the settlement agreement. Can I have it changed or have corrections made?

It depends on what stage of completion it is in. Is the divorce final? If not, you likely can amend the settlement agreement if both parties agree. If the divorce is final, it's very difficult to go back, but it may require a separate legal action. Ask your lawyer.

Do I have to pay taxes on the divorce settlement?

You need to get with your divorce lawyer and discuss this question before you sign your name. A divorce settlement generally is not taxable, but an alimony settlement certainly can be. If assets are sold to complete an agreement of settlement, there may be capital gains due on the sale. If your attorney is not absolutely certain answering all your questions, we suggest you meet with a CPA or tax attorney.

Does it make any sense to make a verbal agreement with my husband? My gut tells me I should have a marriage settlement agreement in writing. He's insisting we do this privately. Should I?

We presume you mean not have a property settlement agreement? If so, do not make a verbal agreement. People change. Conditions change, and intent changes. Only make an agreement in writing, with the court and overseen by an attorney.

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