Divorce is a process that no one wants to experience. This stage of property division involves emotion.
Couples living in community property states need to know the ins and outs of these laws if they want a fair and even resolution. Divorce laws related to how marital assets and debts are split between spouses are community property laws.
Understanding these types of laws and how they affect divorce is essential before embarking on it.
What Are Community Property Laws?
Only a few states have community property laws, some of which include New Mexico, California, Arizona, and Texas.
These laws make all assets and debts with a date of marriage property collective to the extent they are equally divided in divorce. In other words, each spouse will have a 50/50 share of the marital estate, regardless of how or who earned or purchased the property.
Likewise, if either spouse took out any debts during the marriage, they are also evenly divided between both parties.
Co-ownership vs. Separate property
The first step for states with community property is to differentiate between community and separate property. Knowing the difference can result in a substantial portion of the assets being divided during divorce.
- Community property: These are the couple's assets or liabilities accrued during the marriage. They include wages, homes purchased while you are married, retirement accounts earned in the marriage, and debts together, like a mortgage or credit card.
- Separate Property: Separate property is all the assets and debts that belong to only one spouse. It usually consists of property obtained before the marriage, inheritance received by one spouse, a gift given solely to one spouse, and property characterized as separate property in an enforceable prenuptial agreement.
It should be noted that quite a bit of mingling or "commingling" of separate property with community property by spouses in marriage can obscure lines between community and separate assets. For example, suppose you pay a down payment on a house the two of you own with an inheritance (treated as separate property). In that case, that can be community property for your divorce.
Distribution of Martial Assets
Although the community property laws are intended to be equitable, dividing up the assets does not always mean a 50/50 physical split.
Though courts will generally divide assets equitably, this may not necessarily be a 50/50 split; instead, one spouse may receive the family home, and the other spouse may receive investments or a retirement account with equivalent value.
Divining assets commonly depends on negotiation and compromise between husband and wife. A settlement agreement can be reached between the couple via mediation, collaborative divorce, or through their attorneys.
Impact on Debts
The same goes (in many cases) with debts, as community property laws also apply. Debts that the couple made while married are also joint obligations and are split evenly.
For example, if one spouse took out a loan during the marriage, both spouses are responsible for repayment, even if one spouse did not directly benefit from the loan.
Not doing this can lead to issues in the years to come, where either or both parties argue about one having to pay back an amount on divorce.
Protecting Your Interests
The following steps are critical for you to take to protect your interests in a community property divorce.
- Locate and Categorize All Assets and Debts: You should locate and categorize community and separate property with your attorney.
- You Need Documentation: Obtain documents that pertain to property ownership, bank account records, retirement funds, debts, and other assets.
- Get Professional Appraisals: If the divorce involves real estate, businesses, or other valuable assets that cannot be split easily (like memorabilia), then have official appraisals conducted to make sure you are paying a fair price.
- Consider Negotiation: Mediation or collaborative divorce can provide more options for splitting property than a judge-ordered split.
Final Thoughts
During divorce, the division of marital assets and debts is impacted most by community property laws.
This information helps you understand how both parties can be their fairest when settling the case. With an attorney who knows how to safeguard your interests, your soon-to-be ex-spouses can have their rights guaranteed through a resolution that properly considers their unique backgrounds.
Disclaimer:
The content provided on this blog is for general informational purposes only and is not intended to constitute legal advice. Laws and regulations are complex, frequently subject to change, and may vary depending on jurisdiction. As such, readers should not act upon or rely on any information presented on this blog without first consulting with a qualified and licensed attorney who can address and tailor guidance to your unique legal circumstances.
