Property Division

Property division is a key part of the divorce process, where the assets and debts accumulated during a marriage are divided between spouses. This process is guided by state laws, which follow either community property or equitable distribution principles, depending on where the couple resides. The goal of property division is to fairly allocate both tangible and intangible marital assets, including real estate, bank accounts, investments, and personal property, as well as any debts incurred during the marriage.

Types of Property in Divorce

Property in divorce is generally classified into two categories:

Marital Property: This includes assets and debts acquired by either spouse during the marriage, regardless of whose name they are under. Common examples of marital property include the family home, retirement accounts, savings, investments, and shared debts such as mortgages or credit card balances.
Separate Property: Assets or debts that one spouse owned before the marriage, or received as an inheritance or gift during the marriage, are typically considered separate property and are not subject to division. However, separate property can sometimes become marital property if it was commingled or used for joint purposes during the marriage.

Division of Property: State Guidelines

States follow two different approaches when it comes to dividing marital property during a divorce:

Community Property States
In community property states, all marital assets and debts are split 50/50 between the spouses. This approach treats marriage as a partnership where everything earned or acquired during the marriage is equally owned by both parties. However, separate property remains with the individual who owned it before the marriage or received it independently during the marriage.
Equitable Distribution States
Most states follow the equitable distribution method, where marital property is divided fairly, though not necessarily equally. The court considers several factors to determine what is fair for both parties, such as:
- The length of the marriage: Longer marriages often result in a more even distribution of assets.
- Each spouse’s financial contributions: This includes income, homemaking efforts, and contributions toward raising children.
- Future financial needs: If one spouse has significantly greater earning potential or a higher financial need, they may receive a larger share of the assets.
- The standard of living during the marriage: Courts try to maintain each spouse’s standard of living after divorce to the extent possible.
- The health and age of both parties: Older spouses or those with health issues may be awarded more resources to ensure long-term care and financial stability.
- Custody arrangements: The parent who has primary custody of the children may be granted the family home or other assets to provide stability for the children.

Dividing Specific Types of Assets

Certain assets may require special consideration during property division:

Real Estate: If the couple owns a home, they must decide whether to sell the property and split the proceeds or have one spouse buy out the other’s share.
Retirement Accounts: Pensions, 401(k)s, and other retirement accounts may be divided using a qualified domestic relations order (QDRO), ensuring each spouse gets a fair share of the benefits.
Businesses: If one or both spouses own a business, determining its value can be complex, often requiring expert appraisal. The court may divide business interests or award other assets in exchange for one spouse retaining the business.

Debt Division

In addition to dividing assets, marital debts are also subject to division. Courts consider who is responsible for each debt and how much was accrued during the marriage. Debts may include mortgages, car loans, student loans, and credit card balances. Like assets, marital debts are either divided equally in community property states or fairly in equitable distribution states, based on each spouse’s financial situation and responsibility.