Property Division FAQ
What is marital property?
Marital property is property that is acquired by either spouse individually or the couple together during a marriage.
What is community property?
There are nine community property states:
- New Mexico
- In addition, Puerto Rico is a community property jurisdiction
These states generally regard as community property all property that has been acquired during the marriage, other than a gift or inheritance. Even if one spouse earns all the money to acquire the property, all the property acquired is considered to be community property. In community property jurisdictions, spouses equally own all community property (fifty percent owned by the husband and fifty percent owned by the wife).
What is separate (non-marital) property?
The property that each spouse owned before the marriage is considered to be "separate" or "non-marital" property. For the property to remain separate, the spouse must keep it apart from marital or community property. Once the separate property has been commingled (mixed) with marital or community property, it may become part of the marital property.
Will the property division or alimony be affected by whether or not I obtain a fault or no-fault divorce?
That varies from state to state. In some states the court can consider the spouses' faults in deciding how to distribute property and provide what is commonly known as “alimony”. (also known as spousal support or maintenance) In a no fault divorce the issue of “fault” does not affect property distribution or spousal support rights.
Do I get a portion of my spouse's stock options in a divorce?
Yes, if a spouse earned stock options during the marriage, most courts will award at least a portion of the options, or the value of the options, to the other spouse in the event of a divorce.
How is the debt incurred during the marriage divided?
In addition to the property acquired during the marriage, the debt incurred during the marriage is divided upon divorce. Dividing the debt upon divorce determines who is responsible to repay the debt.
If both spouses co-signed for a debt, both spouses will probably be held to "joint and several liability" for the debt meaning that each spouse is responsible for the entire debt, but also the spouses are jointly responsible for the debt. When a joint and several liability is divided, the debt is attributed to both spouses. Often, however, one spouse is made responsible for the entire amount of the debt. This is generally offset by giving the spouse who pays a particular debt more property in the settlement than the spouse who is left free from the debt.
In some states debts that were incurred for the benefit of the family are joint and several liabilities of both spouses. Since both spouses benefited from these family expenses, both spouses would be responsible for the repayment of these debts.
Expenses that were incurred solely for the benefit of one spouse may be left as the responsibility of the spouse who obtained the benefit. However, in most community property states, both spouses are equally responsible for the repayment of debt incurred during the marriage, even if only one spouse enjoyed the benefit.
Typically, the debts that one spouse brings into the marriage (separate or non-marital debt) remain the responsibility of that spouse. In special circumstances (in community property states), both spouses can be held responsible for separate (non-marital) debt.
When a joint tax return is filed, the Internal Revenue Service holds both spouses to joint and several liability for the tax.
Why must some retirement plans be divided in a special manner?
Federal law governs most retirement plans. Most retirement plans receive special tax treatment, allowing contributions to the plan to go in before taxes are paid, and further allowing the income on the money in the plan to accumulate without current tax. Upon divorce, a special order, called a "Qualified Domestic Relations Order" (QDRO) must be issued by the court and served upon the plan's trustee. The QDRO defines how much of each payment is to go to each spouse.
What entitlement is there to my spouse's pension?
If the pension was earned in whole or in part during your marriage, you'll generally be eligible to share a portion of it. A lot depends on the state in which you and your spouse live. Many states do consider that the pension belongs to the participant and his/her spouse jointly. A state court will decide whether or not an ex-spouse or child is to share in the participant's pension. ERISA will uphold the court's decision.
What is "equitable distribution"?
Most states employ "equitable distribution" in dividing marital property as a result of the divorce. Instead of a strict fifty-fifty split equitable distribution looks at the financial situation that each spouse will be in after the termination of the marriage. While equitable distribution is more flexible, it is harder to predict the actual outcome, since the various factors are weighed. Some factors considered in equitable distribution include:
- Earning power of the spouses.
- One spouse having done most of the work to acquire the property.
- The value that a spouse contributed as a home-maker.
- Fault of one spouse in wasting marital property.
- Duration of the marriage.
- Age and health of the spouses.
- Responsibility for providing for children.
- Grounds for the divorce, if any.
What are premarital and post marital agreements?
An "ante-nuptial" or "premarital agreement" is a legal contract between two people who are about to be married. In the agreement, the prospective husband and wife may agree upon the rights that each will have to the property that they bring into the marriage, and/or acquire during the marriage. They may also agree as to the amount of support owed to the other in the event of divorce.
A post marital agreement is a similar contract between a husband and wife, but after they are married. This agreement may alter the rules for the division of property between the spouses in the event of divorce or death. A particular form of post marital agreement, often referred to as a Marital Settlement Agreement, specifies the distribution of property and responsibility for debt between the respective spouses as part of the divorce proceeding.
Laws in each state governing these agreements vary from state to state. To be valid in most states the agreement must be in writing, executed by both parties, must be entered into voluntarily with sufficient time to consider the contents and sufficient information about the financial situation of each party.
What is the effect of a divorce on a will?
It depends on your state’s law. In some states, a divorce automatically revokes an entire Will. In other states it revokes only those provisions that made gifts to the former spouse, not the Will itself. Either way, any property arrangements in a Will should always be reexamined when you contemplate a divorce.