If you’re going through a divorce, you and your spouse have to make decisions about how to divide your money and personal property (furniture, cars, etc.) and items like stocks, business interests, real estate, and debts (mortgages, credit cards, etc.).
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, so negotiating with your spouse usually gives you a better chance to reach a mutually acceptable agreement that reduces future conflict. But if you can’t rich an agreement yourselves, you’ll have to ask a judge to divide your property for you. In such an instance, the court will apply the state’s property division rules in splitting the assets from the marriage.
There are two main systems for dividing marital property: equitable distribution and community property. Equitable distribution is used in the majority of states. It means a fair division of property that was acquired during the marriage, regardless of which spouse actually owns it. Equitable distribution states will give the higher earning spouse a larger share than the lower earning spouse, such as a stay-at-home parent.
Community property is an alternative system of dividing property. Community property states split marital property evenly. Before dividing the property, the court will decide whether each item should be classified as community property or as the separate property of one spouse.
There are two systems of characterization of property that are used in all states:
- In equitable distribution states, property is either non-marital or marital property
- In community property states, there is separate property and community property
Non-marital or separate property generally includes property that each spouse brings into the marriage, keeps in his/her own name and keeps separate from marital assets. It also includes gifts and inheritances to one spouse that are kept separate.
Marital or community property generally describes property and earnings acquired during the marriage. This includes work income, real estate, furnishings, personal property and the like.
One of the most difficult items to divide is the family home. If one spouse owns the home as separate property – perhaps because that spouse inherited the house, purchased it before the marriage, or had title to the house in his name only – that spouse may ask the other party to leave. If the two spouses have joint title to the home or the home is otherwise considered marital property, but one spouse provides primary care for couple’s children after the divorce, that spouse usually stays in the family home. Spouses without children who have joint title to their family home can decide who gets to stay there in whatever way seems fair to them. Or they can ask a court to decide for them.