Laws are different in each state, but you can count on one of two methods for dividing your property when you're divorcing:
Community Property Division
In community property states, each spouse is entitled to one-half of all the property acquired during the marriage.
The separate property of each spouse isn't included in property division in community property states. "Separate property" typically includes:
- Property or businesses owned prior to marriage or living together
- Gifts and inheritances from family that haven't been "commingled" with community assets (such as in a joint bank account)
- Pension proceeds of either spouse that vested prior to marriage
- Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
In all other states, courts will divide a couple's assets in an "equitable" (fair) manner. "Equitable" doesn't necessarily mean "equal," but what's fair to both spouses.
In deciding what's "equitable", a court will commonly take into account:
- The length of the marriage
- The work history and job prospects of each spouse
- The physical and mental health of each spouse
- The source of particular assets
- Expenses of the children
Taking A Property Inventory
It's very important to give your lawyer a complete list of all property belonging to both you and your spouse. It's vital not to hide assets, as anything left out of the property settlement will have to be dealt with later.
Many lawyers have property checklists designed to jog your memory regarding property you may have forgotten about.
Assets which people sometimes forget to list include:
- Pension and retirement accounts
- Stocks and bonds
- Certificates of Deposit
- Money Market Accounts
- Items from your safety deposit box
When you and your spouse can't agree on the value of a particular piece of property, it may be necessary to have a professional appraiser- such a real estate broker- put a value on the property for you. You'll want to provide your lawyer with any information you have regarding the value of property, including prior appraisals and assessments from tax collectors and so forth.
Many divorcing couples make the mistake of fixating on one piece of personal property, such as an art object or something else of sentimental value, and spending many times the value of the object in arguing over who will own it. It's almost always better to compromise between the two of you as to how to divide your personal household possessions, unless your lawyer finds some reason to get involved.
You'll want to consult with a tax lawyer or certified public accountant regarding any possible tax consequences of holding, transferring or selling property as part of the divorce process.
Property Settlement Agreements
If you and your spouse can agree on how to divide your assets, whether it follows your state's guidelines or not, your lawyers will write up a formal agreement called a "property settlement agreement" or "separation agreement." Detailed lists of who gets what will be included in this agreement.
Read the property settlement agreement carefully, and ask your lawyer about anything you don't understand. Once you've signed the agreement and it's been approved by the court, it will be difficult and expensive to change.
Following Through After the Divorce
As soon as the property settlement is approved or the court finalizes the divorce, you'll want to take care of the details of property transfer:
- Get your ex-spouse's signature on any deeds, stock transfers or bank account forms that will be necessary to transfer property into your name
- Make any payments necessary to fulfill your end of the property division arrangement
- Start the process of refinancing property if that is a part of your agreement
- Make sure you release your name on the title to any property your ex-spouse is receiving
While it may be the last thing you want to do, taking care of these details will save future trouble and make it easier to gain closure on this chapter of your life.