Divorce can be a long and complicated process, especially if the couple has significant marital assets (house, cars, retirement plans, and family business) to split. Deciding who gets what makes the process more difficult.
Before we go any further, let’s understand what marital property is and how you can determine which assets fall under this category.
Marital Versus Separate Property
Marital assets (also called community property) refer to all the property that is jointly owned by a married couple, or the property that either of them purchased during their marriage tenure.
Everything that you owned or acquired before your marriage is your separate property. However, if you mix your separate property with your marital property, it no longer remains your separate property. For example, you re-title your house by making your spouse a co-owner or you deposit your savings into an account owned jointly by you and your spouse.
Everything Is Fair but Not Equal in Divorce
Couples living in community property states get an equal share (50% each) of all marital assets after a divorce. These states include Texas, California, Alaska, Idaho, Arizona, Wisconsin, Louisiana, New Mexico, Washington, and Nevada. Those living in equitable distribution states (all other states) get their property divided fairly and that may mean unequally. One spouse may get more than the other if the judges believe it is fair. This type of agreement is more complicated because the idea of “fair” differs for both parties.
Let’s discuss in details how different marital assets of couples who live in the second category of states are divided after a divorce:
1) Family House or Any Other Real Estate
Couples have two broad choices when it comes to dividing the family house.
- If both parties want a clean and straightforward settlement, selling the property may be a good idea. However, selling a house in the current market can be difficult, and you will have no idea how long it might take. As a result, you may have to hold on to a home you no longer want or sell at a reduced price for a quick sale.
- In situations where one spouse wants to keep the house and the other wants to sell, or if both the parties want to keep the house, the court may give the ownership of the house to the partner who gets the custody of the kids, but at the cost of other valuables that he/she wishes to retain. The spouse who receives the house can “buy out” the other’s interest in the property. If your ex-gets the house, make sure that you get your name removed from any deeds, mortgages, or other rights or obligations on the property.
In both cases, the property will be first valued for a settlement. If the parties can’t agree upon a price, the court may order a joint report from a local estate agent or surveyor.
If you live in an equitable distribution state and want to keep the car purchased during the marriage, you will have to convince the judge why doing so will be a fair division. A judge can award the vehicle to the spouse who needs it more, but he/she may have to pay the other person 50% of the value of the car, or a percentage that’s fair under the circumstances.
What if your partner’s name is in the title, but both of you have paid the loan? In a situation like this, titles alone aren’t enough. If community funds are used to purchase any property, then the item will be divided equally during the divorce.
3) Bank Accounts
- If You Have a Separate Savings Account: In this case, your savings will remain your property. If your partner has a power of attorney over your savings account, you can withdraw it at any time without his/her permission.
- If You Have Joint Savings Accounts: In this case, neither of you can access the account without the other’s permission. Both of you will get an equal share out of the savings account. However, the money that solely belongs to you (like your salary) stays only with you and your spouse gets no hold over it.
4) Household Items – Furniture and Other Appliances
Both parties should work out who will take what. For this, they should agree on a value for all the items so that the one who keeps them pays their share of the cost to the other. If either of the parties cannot agree on the value of the items, the court may order a sale and split the money accordingly.
The couple may also need to hire someone to assess the value of the items. If you live in an equitable distribution state like Illinois, you may want to consider a Wheaton divorce lawyer who can help you meditate with your spouse over the disputed items. Remember, sometimes the cost of hiring someone to access the value of your household items can be more than the total value of the items. So try to sort this out internally with your spouse in consultation with your lawyer.
5) Family Business
According to the National Federation of Independent Businesses, approximately 1.2 million companies in the U.S. are joint ventures run by married couples. Managing a business together after divorce may not be a viable option for many couples. The best way to handle a joint business after a divorce can be to get the company valued first. The spouse who wants to continue operating it can then buy out the other spouse’s interest. In cases of insufficient assets for a buyout, payments can be made over time. If the parties don’t settle on an agreement, then selling the business and splitting the amount can be the last resort.
6) Retirement Benefits
A Qualified Domestic Relations Order (QDRO) is used at the time of divorce to divide retirement benefits between the two parties. When a judge signs a QDRO, the retirement benefit provider is supposed to create an account in the name of both the parties and divide and deposit the amount equally in both the accounts. A QDRO may allow both the parties to avoid tax liabilities and penalties related to early withdrawal or capital gains.
In other cases, one spouse may retain the retirement benefits and compensate the other spouse with a buyout. However, this can have capital gains and tax consequences for the other partner.
7) Debts and Loans
Like the couple’s assets, the court will also divide their loans and mortgages, and decide which party is responsible for paying which bills. Most often, the court divides debts equally between both the spouses. But in some cases, the spouse who receives more property may also be assigned more debt. The laws for dividing debts and mortgages between partners may vary from state-to-state.
If your ex-partner cannot pay the debts assigned to them in the divorce settlement and his/her credit card company bothers you, you can petition the court to enforce the divorce agreement. The court will order your ex-spouse to appear in the court and punish him/her with fines or jail term.
To summarize, the process of divorce can be simplified through property division agreements. The better you work with your spouse, the quicker you can reach a decision. However, couples may need to negotiate to reach a final deal that benefits both parties. The role of divorce attorneys comes into play here. Hire a competent divorce lawyer to make the process less complicated and get a fair share of the marital assets that you have accumulated by spending your life’s earnings.