How Assets, Properties and Debts may be Distributed during Divorce

How Assets, Properties and Debts may be Distributed during Divorce

May 05

How Assets, Properties and Debts may be Distributed during Divorce

Division of properties, assets and debts during divorce can be very contentious as each spouse will naturally fight for what they hold to be personally theirs, as well as make a claim on what can be considered marital property. To make sure that personally owned properties (those acquired prior to marriage) and money earned through the sale of these will be protected in the event of divorce, many marriage counselors and financial experts advise those planning to marry to give pre-nuptial or pre-marital agreement a thought. Though not wishing that couples should divorce each other later, counselors and experts say that a pre-nuptial agreement will make division of everything easy if the marriage fails eventually.

In about nine U.S. states (Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona: Puerto Rico and Alaska, despite not being community property states, allow couples to opt for this system of distribution), equal distribution of everything, also known as the community property system of distribution, is observed.

In community property states, spouses equally own all income and assets earned or acquired during the marriage, even if only one of them was employed. Properties acquired using “community” money is also equally owned by both spouses. This equal ownership or distribution applies to debts too which can include home mortgage, car loan balance and/or unpaid balance on credit cards.

Exempted from being distributed in the states mentioned include: properties given as gifts or inheritance to one spouse at the time of marriage; properties that one spouse purchased using money that he/she acquired before marriage; profits resulting from non-marital properties; and, stipulated personal properties in a pre-marital agreement.

The equitable distribution system is observed in all other U.S. states. In the equitable distribution system, properties are divided, not equally, but equitably between the spouses. This fair and reasonable distribution takes into consideration many factors, like: the earning potential and capability, as well as the income of each spouse; emotional and physical condition and age of each spouse; tax consequences of the properties, assets and debts of each spouse; income and/or properties that each spouse contributed into the marriage; length of marriage; and, the value of one spouse staying at home or raising the children. Though there are no fixed rules in determining who receives what or how much, this system usually awards to the spouse who acquired or earned a specific property.

As explained by Fort Worth divorce attorneys, “Any property that was acquired during the course of your marriage—including your home, cars, income, spouse’s income, stocks, retirement plans, and anything else with monetary value—is considered to be what is known as community property. Any asset that falls under this category will need to be fairly divided between you and your partner. While you will have more control over this process if it is voluntary, it may be necessary to argue your case in court. With regard to debts, or shared debts, these may be subtracted from the community assets to calculate your net community estate, which may be used as a guidepost during this process of dividing the property you and your partner hold.”