When a couple separates, they must decide how to divide the property that they have accumulated during their marriage. This includes not just money and personal property but items like stocks, business interests, real estate, and debt.
The law of the state in which a couple divorces will determine how exactly the court will divide money and property, but states generally follow one of two systems: community property or equitable distribution. In community property states, most property acquired during the marriage is held jointly by the spouses. This makes it more likely to be equally divided. In equitable distribution states, property acquired during the marriage is considered marital property. It is divided fairly but not necessarily equally.
If possible, it is often the most favorable outcome for everyone to divide your property on your own without resorting to the assistance of a court. You never know for sure how a court will divide your property, and legal proceedings can get contentious, so negotiating with your spouse usually gives you a better chance to reach a mutually acceptable agreement that reduces future conflict. When discussing this issue, each spouse should make sure to let the other know of any hidden types of property so that they can be fairly divided. Concealing property of value from a spouse can lead to serious negative legal consequences when discovered.
Know Your Spouse's Assets
Most divorces settle out of court one way or another, but do not rush into a settlement. If you believe that your spouse is not forthcoming about their assets, the discovery process leading up to trial may help uncover previously unknown property or debts. It is your right to settle at any time – even the night before trial – so do not let the process intimidate you.
One way to begin to divide your property is to list all your items of value. You and your spouse should try to estimate the value of each item. Starting with the most valuable items, go down the list and decide which of you should have each item. You do not need to divide the list exactly evenly, but you should avoid a starkly imbalanced split. Sometimes using a neutral third party, such as a mediator, helps to minimize tension during this process. The parties should then agree on whether each item is marital property or separate property and how it should be divided.
One reason to divide property in a relatively balanced manner is that a judge will need to approve your agreement so that it can be enforced. If one spouse receives dramatically less value than the other spouse, the judge may be reluctant to approve the agreement without investigating the details. Each spouse may retain a lawyer to ensure that the property was divided fairly. A judge may be more inclined to approve an agreement without further investigation if each spouse has retained a lawyer.
Unfortunately, not all couples are able to reach a mutually agreeable property division arrangement. In such an instance, the court will apply the state’s property division rules in splitting the assets from the marriage.
Consider the Future
As divorcing spouses move through the process of dividing assets, they should keep in mind how the division will affect their future. For instance, ex-spouses’ intentions in estate planning documents, such as wills, trusts, and insurance policies, may be affected by property division. Ex-spouses may want to review these documents after divorce to protect their intended beneficiaries.
Divorcing spouses will also want to consider whether their marriage may make them eligible for Social Security benefits under their ex-spouse’s work record. Spouses may want to time their divorce if they are close to meeting the 10-year rule or other eligibility requirements. Eligibility for these benefits may affect alimony awards as well as asset division – and vice versa.
Divorcing spouses who come to a settlement agreement instead of having the court divide their property may divide it in any way they would like so long as the judge does not find that the agreement is unconscionable. Therefore, many couples prefer to try negotiation or mediation before resorting to the courts.