In a divorce proceeding, the court will look at both marital property and separate property to decide who gets to keep what once the marriage is dissolved. States can define marital property and separate property differently. If you and your spouse can’t agree on how to divide marital property, the courts can step in and make the decision for you. Whether you live in a common-law state or a community-property state can determine whether the court uses equitable distribution or equal distribution guidelines to divvy up marital property.
Community Property
In community-property states, equal distribution gives both spouses a 50/50 share in marital property. That means that during the divorce proceedings, the negotiations are usually centered around whether or not property is community property or separate property. All separate property goes back to the spouse whose property it is, while the marital property is split equally. There are nine community-property states in the United States. The states that follow community-property guidelines for dividing marital property are:
ArizonaCaliforniaIdahoLouisianaNevadaNew MexicoTexasWashingtonWisconsin
Equitable Distribution of Marital Property
Most states use equitable distribution to divide up marital property. That means the court attempts to divide property fairly between spouses based on specific factors or criteria, but marital property might not be split equally. The court would consider a variety of factors, including each spouse’s income, health condition, and any contributions made during the marriage. For example, if one spouse handled all of the childcare, or worked so the other spouse could go to school, that could affect the way marital property was divided. Essentially, the court decides what is a fair way to divide the property. Let’s say you and your spouse are divorcing and you’re trying to decide who gets to keep the home you purchased together, and both your names are on the loan and the deed. If your spouse worked but you didn’t because you stayed home with your three children, the court might decide to allow you to retain the property so you can continue caring for your kids.
Example of Marital Property
In New York, for example, marital property includes:
Real property you and your spouse bought during the marriage, except for any contributions of your separate property you may have made to such property, such as paying part or all of the down payment with separate property fundsPersonal property such as cars, boats, airplanes, furniture, and artwork you and your spouse bought during the marriageCash, securities, bank accounts, retirement accounts, and pensions acquired during the marriageAdvanced educational degrees and permits to engage in specialized businesses acquired during the marriageGifts to each other
Separate Property
Separate property includes real or personal property obtained prior to the marriage, inheritances, and third-party gifts. It also includes compensation for personal injury not related to loss of wages, and property exchange for separate property. Separate property also includes property acknowledged by both spouses as being separate in a written agreement.
Commingling or Transmuting Property
If you live in a state that observes community-property laws, it’s important to understand how separate property can become community property. This can happen when separate property is commingled with community property. It can also work in reverse if community property is retitled to become the individual property of just one spouse. Say, for example, that you own a home prior to marriage. Eventually, you decide you want to refinance the mortgage and you ask your spouse to sign off on the loan with you because they have a higher credit score. They agree, on the condition you also add their name to the deed to the home. You do so, which makes what was once a separate property a community property since it’s in both your names.
Marital Debt
Say your spouse has student loan debt for loans they took out before you were married. They ask you to be a co-signer on a refinance loan. You agree, with the condition that they’ll repay the debt themselves. Under community-property rules, however, you’re both legally and financially responsible for the debt. So it’s possible that you could be ordered to pay half the debt if you divorce as it’s technically marital debt now.
