One of the major issues that often comes up in divorce is splitting property or assets. Marriage is usually as much about economics as it is about emotion so how property is divvied up is key. Consequently, parties typically pursue their entitled interests in assets and/or finances as part of the divorce. How assets or property division in divorce when they are distributed and what each party gets are all important where the parties accumulated finances and/or personal or real property.
Part 1 – Family Court Frequently Asked Questions
The Economics of Marriage
One of the basic principles of marriage is that the union would improve the economic status of the parties, and the family. Traditionally, the wife was a homemaker while the husband was employed outside of the home. This arrangement did not necessarily increase the couple’s financial status but often it afforded the parties the opportunity to establish a reputable status. Since the late 70s, however, women working outside of the home while their husband worked became more acceptable. Financial success was the objective in most cases, even though for some it was a matter of necessity.
On the other hand, women choosing to stay home to raise a family was still a preference for many. As a result, many of these women were unable to accumulate any financial security on their own since they did not earn an income. When they divorced, they were left in a much worse financial state than when they married. So, the property division laws started to develop in various states to address this.
The Economics of Divorce
It was not until the early to mid-1980s that states started to see marriage as an economic partnership. Society finally started to accept the idea that marriage was as much about economic success as it was emotional. As a result, state legislators started to enact laws that addressed how financial and property accumulation during marriage should be split upon divorce.
First, property must be identified. Property acquired during marriage needs to be ascertained to ensure fairness.
Next, estimating time of acquisition of the property is important. Property acquired before marriage is usually considered separate property. Separate property (property acquired before marriage, by inheritance or gifts) is often excluded from division in divorce. (Although there are instances where separate property may be subject to distribution based on your state’s laws.) And last, a clear understanding of how your state splits assets determines the final award.
Part 2 – Family Law Frequently Asked Questions
Property Division Laws
States use one of two principles with respect to property division, either community property or equitable distribution.
Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. These states laws indicate that property acquired by either spouse during the span of the marriage is considered marital property and subject to be divided equally. (This may not apply to separate property or property either party possessed before the marriage.) Each state may have exceptions what they consider marital, how it is to be split and so on.
Equitable Distribution states are the other 41 states. The equitable distribution states are of the belief that marital assets are to be divided “equitably” or fairly, which is not necessarily equally. In these states the parties may receive a percentage of the overall value of marital property as opposed to actual splitting down the middle. In addition, the parties can wind up with a variety of assets and liabilities as property division in equitable distribution states.
Scenarios for Property Division
A. Wife inherits a farm ranch a year before she marries Husband. The parties move onto the property after they wed. Husband works on the farm and increases its value over the course of their 14-year marriage. In the divorce he asks for half of the value of the property based on his contributions. In a community property state, he would probably not be entitled to anything. But in an equitable distribution state, he might be entitled to some percentage of the increased value that accumulated during the 14 years.
B. Husband receives a $120,000 gift from his parents during marriage to Wife. Upon divorce, Wife seeks to have this gift included in the property division part of the case. In either community property or equitable distribution, she would not be entitled to any portion of the money. However, if she contends that the money was meant as a gift to both, then she has a chance to prevail.
C. Take Scenario B, Husband deposits the cash into the couples’ joint account. In an equitable distribution state, this is considered “comingled” assets and subjects the money to property division.
D. Take Scenario B, Husband buys a vacation home that has both parties’ names on the deed. Again, this is considered “comingled” and subjects the property to division.
It is important to understand the consequences of divorce upon financial success or property acquisition. Not that you should have these thoughts before marriage, although there is nothing wrong with this thinking that is what prenuptials are for. But keeping these things in mind before divorce can help you prepare better. In addition, for purposed of negotiating having some insight on property division is extremely helpful.
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