Dividing your property is a significant issue, whether you handle the divorce yourself or hire a lawyer. You’ll face many difficult decisions about your divorce, regardless of whether you live in a community property state. The best outcome is for both partners to agree on how to split debts, property, and assets. However, disputes often lead to lawyers, who can negotiate the division before heading to court. Several factors influence property division, including the type of divorce, the nature of the property, and the state in which you live.
Types of Divorce
The type of divorce you are going through plays a major role in how your assets will be divided. If both partners agree on the terms and file the papers, it’s considered an uncontested divorce. An uncontested divorce typically does not require a courtroom and is less expensive and time-consuming. A contested divorce, on the other hand, occurs when there are disputes over the terms of the divorce, such as child custody or spousal support. In this case, each party hires a lawyer, and a judge oversees the case, which can be more costly and time-consuming. Mediation and arbitration may be necessary in both types of divorces.
Types of Property
State law classifies property as separate or marital, also known as community property. How property is classified determines how it will be divided. Separate property includes assets that you own solely, such as inheritances, gifts, or assets you had before the marriage. Your paycheck is generally considered marital property, but a pension vested before the marriage may not be. Community property refers to everything acquired or purchased during the marriage, including income from a job or funds in a joint checking account. A house is typically considered community property, though there are exceptions.
Agreements vs. Trial
Divorces often end up in court due to disputes over property division or child custody. However, you can save time and money by agreeing on the division of assets and any financial obligations. You and your partner have the freedom to divide everything as you see fit, as long as both parties agree. However, a judge may not approve the agreement if it seems unfair. Once lawyers are involved, the judge will have the final say on the division of assets.
Current State
While the general rules for divorce are similar across the United States, each state has its own laws. Most states categorize assets as either separate or marital. It’s important to consider your state’s specific divorce laws when dividing assets. For example, some states treat property acquired before marriage as separate, while others may keep certain assets separate even after marriage. Many states, like Florida, use equitable distribution, meaning assets are divided in a way that is fair and equitable. A judge will take various factors into account when determining equitable distribution, including the ages of the spouses, the length of the marriage, future earning potential, and the property owned by the couple.
Dividing Assets During Divorce
To save time and money, it’s best to divide your assets before involving lawyers or going to court. Start by creating a comprehensive list of all your belongings. Both partners should include everything they own, both jointly and separately. Agree on which personal items hold no significant value and leave them off the list. Try to agree on the value of each item, though some assets, like a house or business, can be more complex. If needed, agree on a third party to appraise more complicated assets.
Once you have the list, work together to determine who will keep what. Begin with the most valuable assets and continue down the list to see how much you can agree on without dispute. If both parties come to an agreement, the court will typically approve the division. However, the court may intervene if one person receives significantly less than half of the assets without legal representation, as it may deem the agreement unfair.
Dealing with Debts
Debt accrued during your marriage can include credit cards, taxes, car payments, and mortgages. If you incurred debt together, it will likely need to be divided along with the property. A divorce agreement can assign debt to one person, but creditors will still hold both parties responsible. For example, if a judge orders your partner to pay joint credit card debt and they miss a payment, creditors can still come after you for the money. The situation becomes more complex if you have to go back to court to have your spouse reimburse you. The easiest way to avoid this is to close joint accounts and remove your partner from any joint credit cards.
