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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:
 Community
Property
In 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 "co-mingled" with community assets (such
as in a joint bank account), or pension proceeds of either spouse that vested prior to marriage.
Equitable
Distribution
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
In 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
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'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. |
Q&A
on divorce settlement and division of property issues |
| Q. |
Can non-marital property acquired prior to marriage be divided upon
divorce? |
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| A. |
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 co-mingle
it with marital funds, that would re-constitute its status. There can be other cases. Consult your lawyer. |
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| Q. |
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? |
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| A. |
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. |
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| Q |
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? |
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| A. |
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. |
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| Q. |
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? |
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| A. |
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. |
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| Q. |
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? |
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| A. |
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. |
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| Q. |
I stayed home and cared for our children while my husband built a law practice.
That practice is a marital property asset, right? |
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| A. |
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. |
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| Q. |
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? |
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| A. |
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. |
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| Q. |
The soon-to-be ex said he changed the beneficiary on his life insurance policy
to his girlfriend. Can he do that? |
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| A. |
Another question where it will depend on your state laws. Some
states rule yes, others, no. 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. |
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| Q. |
My husband has an investment account at a brokerage firm, in his name only.
That is considered a marital asset, correct? |
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| A. |
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. |
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| Q. |
I signed the settlement agreement. Can I have it changed or corrections made? |
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| A. |
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. |
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| Q. |
Do I have to pay taxes on the divorce settlement? |
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| A. |
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. |
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| Q. |
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? |
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| A. |
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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