Divorce can be a messy and traumatic process. There are often countless complicated and sensitive issues to resolve when you split up with your spouse. And because it’s personal, it’s easy to get caught up in the emotions and overlook the practicalities of what needs to be done.
For most couples going through a divorce, dividing up assets isn’t much of a problem. However, the more properties there are to divide, the messier it can get. So how do you divide them in divorce? And what happens if you think you don’t need to split anything?
The question of how to split these assets draws many issues into play, such as partial property ownership, prenuptial agreements (if any), debts accrued as a couple, and more.
Table of Contents
- What Is The Meaning Of Assets And Debts In A Divorce?
- Property Settlement Vs. Going To Trial
- State Laws On Asset And Debt Division In Divorce
- Marital Property And Separate Property
- Marital Property In Divorce
- Separate Property In Divorce
- Equitable Property Division In Divorce
- Community Property Division In Divorce
- Splitting Debts In Divorce
- Final Thought
What Is The Meaning Of Assets And Debts In A Divorce?
Assets are the value of all properties. They are real estate, cars, furniture, jewelry, artwork, and other joint properties, which will all be divided in a divorce. The court uses an equitable distribution formula to determine how much each spouse receives in the division.
On the other hand, debts are obligations spouses have incurred while married. But in most cases, both spouses may have separate credit cards and loans during the marriage. These may be considered marital debts when calculating alimony or spousal support payments.
If one spouse has more assets than the other, then the spouse with more assets will likely be awarded more money as part of the divorce compensation or alimony award.
Property Settlement Vs. Going To Trial
When a marriage falls apart, people think the most important thing in divorce is who gets the most of the divided properties. While this may be true, it’s not necessarily the most important aspect of a divorce. The first and most important thing is whether you and your spouse agree on how to split your properties. Otherwise, the process will be long, tedious, and frustrating. This is also why it pays to know how to protect your asset from a divorce.
When splitting the assets of a marriage, many couples opt for a property agreement. These contracts are ideally drafted by an experienced divorce attorney who can negotiate and structure them to ensure each party gets what they’re entitled to.
Most divorces are settled out of court, and the separating couples must agree to split their assets and debts fairly and realistically. If there’s no agreement on the division of assets, one party could be left with nothing. This could lead to a bitter dispute that could last for years or even decades.
As much as possible, the couple must decide who will receive which properties or debts based on their state’s legal requirements, which typically consider factors such as income levels, age and health of each party, and their family structure (for example, if they have children together).
State Laws On Asset And Debt Division In Divorce
Whether you decide to do a property settlement or go for trial, you should understand the property division rules. Awareness of these rules can come in handy when negotiating a divorce settlement with your spouse. Not to mention that they’re the same rules that’ll govern the judge’s directive should you go for a trial.
Rules that govern asset and debt division are based on state laws, and there are some notable differences from state to state. However, the basic principles are the same across the US.
Marital Property And Separate Property
Marital and separate properties are two different types of assets, debts, and properties that can be divided in a divorce. Marital property is those acquired during your marriage, including money or assets that are not separate from your spouse. This includes bank accounts, stocks and bonds, real estate, and other assets.
When splitting assets and debts during a divorce, you will discover disparities in how states define separate and marital properties. For instance, the law on ‘properties acquired during marriage’ does not apply after separation. Once a couple has gone their separate ways, their succeeding earnings are considered separate properties.
Also, drawing a line between separate and marital properties can get complicated. This can happen if a couple puts their personal and marital funds together in one bank account. But it’s worse when a spouse pays the mortgage on a house the other spouse owned before marriage.
Marital Property In Divorce
The law classes marital properties as those owned by both spouses equally unless it’s specifically designated otherwise by a court order. If one spouse wants to keep certain marital assets, there must be a court petition submitted to get such an order. Without this, then all marital assets will likely be divided equally between the spouses during divorce.
However, most states have community property laws that require equitable distribution if there’s a disparity in earnings between spouses at the time of divorce.
Separate Property In Divorce
Separate properties are everything you owned before marriage, such as cars, clothes, and household furnishings. It also includes properties acquired through gifts or inheritance.
This does not include assets acquired during marriage like bank accounts or stocks and bonds.
Equitable Property Division In Divorce
In a divorce, the court will divide your assets and debts between you and your spouse according to the equitable property division rule. It means that each party gets what the judge deems fair, depending on the circumstances in the case.
A common misconception is that this means that you get half of everything you brought into the marriage, but this is not true. Although it’s up to the judge to make a ruling on what’s fair, some factors will be considered. These include:
- Both your debts and liabilities.
- If the other spouse stopped working to raise their kids or if either of them contributed to the other’s education.
- Each of the spouses’ health, age, and economic situation.
- The tax impact on the property division.
- What it means for one spouse to keep a particular property like a family home or business.
In most states, debt is also divided by a judge according to the guidelines set forth by the state’s rules of civil procedure or the family law courts’ jurisdiction over the case.
Community Property Division In Divorce
Only nine US states use the community property rule for marital asset and debt division. According to these states’ laws, spouses have an equal claim to their marital properties. The laws here assume that marital properties should be divided equally between the couple.
However, there are a few things that differ from state to state. For instance, a California judge must split the community property equally. In contrast, Texas and Arizona call for a fair division of community properties.
Splitting Debts In Divorce
If you took a loan as a couple during marriage, you’d most likely share responsibility for paying it when you divorce. However, if you have a personal credit card in your name and you’ve never used it for family expenses, then you are solely responsible for that debt. This also means that if issues arise from the credit card’s use, you’ll be the one to face the consequences.
Divorce laws vary between states; therefore, you must figure out the laws in your state to best understand how your assets and debts should be divided. But because of the complexities that naturally come with the process, it’s recommended to seek the help of an attorney when facing divorce. A divorce lawyer will help you ensure that you make all the right decisions while moving through the process.