As a newlywed, you likely never gave a second thought about whether you lived in a community property state or about terms like equitable distribution. When a marriage ends in divorce, however, it usually (and unfortunately) involves tough decisions and difficult discussions — including those concerning the fair division of property once shared during the union.
In an ideal situation, the couple can work together to decide how to split up property, debts and assets. When that's just not possible because of a dispute or a complex issue regarding the ownership or value of property, both spouses may have to hire attorneys to negotiate on their behalf or even go to court and ask a judge to divide the marital estate (property owned jointly by the couple).
There are typically three factors that play into deciding how to divide up the property: the type of divorce you’re seeking, what kind of property you own and the state where you currently reside.
The different types of divorce
Although most people don’t get the opportunity to thoughtfully decide which type of divorce they would like to have, there are options for those willing to work together.
For example, in an uncontested divorce, both parties come to an agreement on all the terms of the divorce and file the papers with the court. There is usually no formal trial in this scenario. An uncontested divorce can be much less expensive than a contested divorce, saving you time, court costs and legal fees, as well as helping you avoid protracted disputes with your spouse.
Contested divorces are what stereotypically come to mind when we think of divorce. These are cases in which there’s a lot of disagreement over key areas such as property, children and spousal support. Each spouse is represented by an attorney, and a judge oversees the case until settlement. This type of divorce can be long, costly and potentially contentious.
Others types of divorce fall somewhere in the middle. Mediation, arbitration and collaborative options allow the couple to be independently represented by counsel without incurring the full costs of a trial.
The option that will work best for any couple depends on the level of disagreements between the spouses and the willingness to work together toward a resolution.
What kind of property you own
Property division is a big issue during a divorce. One of the most common questions is, “Who gets the house?”
State law will usually dictates the divvying up of your property. It’s based on whether you reside in a separate property state or a community property state:
- Separate property belongs only to one spouse, such as something you owned before getting married, gifts or inheritances specifically given to you or the proceeds of a pension that vested before the marriage.
- Community property is everything that both of you earned or acquired during your marriage (e.g., the money from your job that you placed into a joint checking account and used to pay bills or debts during your marriage). Property — like a house — bought with a combination of separate and community funds is generally considered community property.
The state where you currently reside
Courts divide property through one of two ways: community property or equitable distribution. Debts are divided according to the same principles. Here is how property is divided up depending on where you live:
- Community property states: In some states, all married property is classified as either community or separate. When you get divorced, community property is generally divided equally between the spouses, while each spouse gets to keep his or her separate property.
- Equitable distribution: In all other states, assets and earnings accumulated during marriages are divided equitably (fairly) but not necessarily equally. Some of these states may order one party to use separate property to make the settlement fair to both spouses.
Note that division of property doesn't necessarily mean everything gets physically divided up equally. Instead, the court may grant each spouse a percentage of the property's total value.
Dividing up property yourselves
If you and your spouse are going to try to divide your property yourselves, here are some steps to get you started:
- List your belongings. Working together, make a list of all of the items that you own jointly. Of course, you can omit items both of you agree are personal things of insignificant value.
- Value the property. Try to agree on the value of anything worth more than a specific agreed amount, say $100 or $500. If there is a house, a business or anything that's difficult to value, get an opinion about that from some agreed-upon outside authority.
- Decide on the logical owner. Now go through your main list, item by item, and decide whether there is some good reason to have each piece of property go to one or the other of you. Start with the biggest value items and see how far you can get.
- Get the judge's approval. If you and your spouse can agree on dividing the property you own together, the court will normally approve whatever agreement you've reached. The only exception is when a party who doesn't have a lawyer seems to have agreed to take a lot less than half of the property.