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A Guide to Property Division During Divorce

by | Nov 29, 2023 | Divorce

Going through a divorce can be an emotionally difficult time. One of the most challenging parts of the process is figuring out how to divide up property and assets between spouses. This guide provides an overview of how property division works during divorce proceedings.

What is Considered Marital Property?

Property acquired during the marriage is generally considered “marital property” and subject to division unless it was a gift or inheritance solely to one spouse. Marital property is a broad category that includes several types of assets:

  • The family home and any other real estate purchased during the marriage are considered marital assets even if the deed or title is only in one spouse’s name.
  • Vehicles like cars, boats, and recreational vehicles purchased jointly or by either spouse during the marriage are marital property.
  • Bank accounts opened in either spouse’s name during the marriage are marital property, including savings accounts, checking accounts, certificates of deposit, and money market accounts.
  • Investment accounts and holdings accrued during the marriage such as stocks, bonds, mutual funds, and commodities are subject to division.
  • Retirement funds contributed to or earned during the marriage such as 401ks, IRAs, and pensions are considered joint marital property.
  • Businesses started during the marriage, even if they are only in one spouse’s name, are typically treated as marital property that is divided or split between spouses.
  • Personal property acquired during marriage like furniture, artwork, jewelry, collectibles, household furnishings, and electronics are considered jointly owned marital assets.
  • Debts taken on jointly or individually during the marriage, such as mortgages, car loans, credit cards, and student loans are treated as marital debt and divided equitably.

Separate property that is considered non-marital and stays with the owning spouse includes:

  • Assets and property acquired by either spouse before the marriage took place.
  • Gifts and inheritances received solely by one spouse during the marriage from non-spouse relatives or third parties.
  • Assets agreed to as separate non-marital property in a prenuptial or post-nuptial agreement.
  • Compensation for personal injuries like lost wages or disability sustained by only one spouse may be that spouse’s separate property depending on state law.

How Marital Property is Divided

There are two main approaches to dividing marital property during divorce:

Equitable distribution – About 41 states follow the theory of equitable distribution, though specifics vary. The court divides property fairly between spouses, but not necessarily equally. The aim is a just distribution rather than an exactly equal split. Factors considered include length of marriage, financial contributions, earning ability, custody arrangements, and the needs of the spouses and children.

Community property – Nine states including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin follow community property laws. This means marital property and debts are divided exactly equally. Separate property brought into the marriage or acquired during remains with the owning spouse. However, the appreciation in value of separate property during marriage may be divided equally.

The Division Process Step-By-Step

Dividing property during divorce involves several steps:

Full disclosure – Each spouse discloses all income, assets, property, investments, debts, and anything else of value acquired during the marriage, even if titled or held in only one spouse’s name. Intentionally failing to disclose assets and debts can lead to contempt charges and complications down the road.

Valuing assets – All property must be valued to establish its current fair market value. Real estate and businesses will require professional appraisals. Vehicles, collectibles artwork, and other personal property need to be researched and valued accurately. Retirement fund statements are examined.

Separating non-marital property – Once assets are disclosed and valued, non-marital property is set aside. This may include premarital assets, inherited property, or gifts acquired solely by one spouse.

Dividing equitably or equally – In equitable distribution states, look at the total marital estate and propose a division of assets and debts based on statutory factors and needs. Community property states simply divide everything equally down the middle.

Offsetting assets and debts – The division process may involve one spouse keeping certain assets, like the family home, in exchange for taking on more marital debt like the mortgage.

Splitting retirement – Retirement funds accrued during marriage are divided by a qualified domestic relations order (QDRO) completed by an attorney and submitted to the plan administrator.

Negotiating agreement – Whenever possible, spouses should aim for an uncontested settlement agreement on property division to avoid court intervention.

Getting court approval – If spouses cannot reach agreement, the court will schedule a hearing, take evidence on assets, debts and needs, and issue a final judgment on property division. The court’s decision is binding if an agreement is not reached voluntarily.

Dividing up property during a divorce can be complicated. Hiring experienced divorce attorneys like us here at Northwest Family Law is highly recommended to value assets accurately, negotiate a fair settlement, and handle all related legal and tax implications.

Visit our offices for advice at the following addresses:

  • Kirkland – 1207 Market St. Kirkland, WA 98033

Or call now for a free consultation on (206) 792-0981.