Dividing Your Assets and Knowing State Laws
Dividing Your Assets and Knowing State Laws
If you can't just take the money and run, how should you go about fairly splitting the accumulated possessions of your life together?
Depending on what you have, the job can be easy. You can go around the house and simply take turns choosing what you want. Whoever chooses first during the first round will choose second during the second round and so on. This worked for a friend of ours—until her husband went up to the attic and selected an antique lamp she'd forgotten about. But she swallowed her protest and went on with the process, and she's glad she did. This game of round-robin might sound childish, but if it works for you, go for it! It's better than paying your lawyers hundreds of dollars an hour to do the same thing.
Many people divide furnishings and other items in the home, including collectibles, by listing everything and then taking turns choosing from the list. The key is establishing ground rules. If sets (sterling, bedroom, dining room) are not to be broken up, for instance, then you might decide to allow each person to choose three items per turn, not one. Write each person's name after chosen items. Then, when it's time for one or both of you to move out, each one receives the items allocated on the list.
Variations in State Law
What do you need to know and do? First, you must familiarize yourself with your state's law.
The laws governing the division of property vary depending on where you live. Lawyers use legislation (the state's statutes or codes), court rules, and case law (decisions from cases decided by judges) as a guide to what would happen in your case should you end up in front of a judge. Based on these laws, your lawyer should have a pretty good idea of where the chips would fall if your case went to court. If your lawyer (full-service or limited) is doing the job, he or she will use that knowledge to work out a fair distribution of what you've acquired. If you are purchasing your legal services à la carte, this is one area where a consultation will pay off.
Courts divide property (and debt) according to whether a state adheres to the community property scheme or the equitable distribution scheme. The community property scheme assumes that a married couple owns all assets and debts equally, except for separate property, and is divided accordingly upon divorce. Under the equitable distribution scheme property and debt is supposed to be divided “fairly” upon divorce. Most states follow the equitable distribution scheme.
Things get tricky when couples move from one type of state to the other. A competent certified public accountant can help you determine how your property will be categorized if you and your spouse have moved either from a community-property state to a common-law state or the other way around.
Community Property States
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Wisconsin, and Washington are known as community property states. (In Alaska, since 1998, married couples have been given the option of adopting community property rules by signing an agreement to that effect.)
There is no federal definition of community property. Instead, each community property state has its own definition, which is provided in their statutes. In general, community property is determined by what is not separate property, which is property acquired before the marriage, by gift, or bequest.
Although community property—the idea that property acquired during the marriage belongs to both spouses equally—is based on the theory that marriage is a partnership, each state has its own unique twist. Focus on your own state's laws.
When distributing assets in the wake of a divorce, community property states presume that husband and wife jointly own all money earned by either party from the beginning of the marriage until the end of “the community,” generally determined by the date someone physically moves out of the marital residence—with an intent to end the marriage—or when the couple signs an agreement stating their intention to end “the community” of their marriage. (The rules concerning when a marriage or “the community” ends varies widely, so check your state's laws.). In addition, property bought with community money during the marriage is owned equally by both the wife and husband, no matter who purchased it. What is true for money and property, however, is also true for debt; from credit card bills to loans, any debt assumed before the date of marital separation is the responsibility of both spouses in equal measure.
Equitable Distribution (Common Law) States
States that are not community property states are called common-law states. These states adhere to the equitable distribution scheme. In these states the court considers a range of factors when dividing property, such as the length of your marriage, amount and sources of income, liabilities, the contribution to the marriage of each spouse, the nature of the property, the responsibilities each of you had in the marriage, whether you have children and who they are going to live with, your health, your education, your noneconomic contribution to the marriage, vocational skills, employability, and your estate, among other things. In a long marriage, the likelihood of a 50-50 division of assets is much greater than in a brief one.