Separate vs Community Property: How Are Assets Divided During Divorce?
The division of assets and liabilities after a divorce is often fraught with complications. Even if they’re nice, husbands and wives might have vastly divergent views on what is and is not fair.
It is necessary to go to court when divorcing couples cannot agree on the distribution of property and debt, so a judge may make an order based on state law. However, many divorcing spouses are able to come to an arrangement outside of the courtroom.
This brings us to the nuances of community property and separate property. Keep on reading for our full breakdown of both concepts, and how they can affect your divorce proceedings.
Community Property: Understanding the Laws
Nine states in the United States have attempted to alleviate the pain of a contentious divorce by enacting community property laws.
All assets obtained after marriage must be divided equally between spouses in these so-called “community property” jurisdictions. Period. So that people may stop bickering about how much of what they have and who gets what, the law will be used to establish an equitable distribution.
The following are the nine US states:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
States’ divorce laws differ, with some favoring the notion of shared property. However, as of June 2021, only these nine states will have actual community property laws.
An “opt-in” community property legislation exists in Alaska, South Dakota, and Tennessee, allowing for such a property split if both parties agree.
Community property rules apply to registered domestic partners who reside in California, Nevada, or Washington. As a first step, it covers all money earned or gained during the marriage in a community property state by one or both partners.
Every source of earned money (also known as “community income”), every piece of tangible or intangible property purchased with community funds, and every penny in a retirement or savings account falls under this umbrella term. When dividing communal property, debts must be taken into account.
Assets obtained before the marriage or during a formal separation are not included in the concept of community property. Even if one spouse receives a gift or an inheritance during the marriage, such gift or inheritance is not included.
Any debts incurred prior to the marriage are solely the responsibility of the individual who incurred them. The portion of the property acquired with community money is the only portion that is deemed shared.
All other assets will be shared 50/50 in a divorce in a community property state unless the parties agree otherwise. A lot of times, this means that any shared property has to be sold in order for the former partners to divide the money.
What About Separate Property?
Unless a spouse can establish (or the spouses agree) that it is separate property, all property acquired during a marriage is community property.
For example, if a spouse receives an inheritance or a personal injury settlement, this is considered separate property and not marital property. The following are some examples of separate property.
- A residence acquired by one of the parties prior to the marriage
- Gifted by his parents to a spouse;
- A gift from one spouse to the other;
- Contributions to a spouse’s retirement account that were made before the marriage;
- Inheritance from a spouse;
- Injured spouse’s personal injury payout from an automobile accident.
Property bought prior to the marriage is not subject to reimbursement. But if mortgage payments or automobile payments on the separate property were paid using community funds after the marriage, the non-owning spouse might seek recovery of money spent to pay for the other spouse’s separate property.
Divorce Settlement in Court: How Does It Work?
Equal distribution of marital property is not mandated by the legal system. It is the court’s responsibility solely to create a “fair and right” partition of property, taking into account factors such as the children’s needs and education and earning ability, as well as blame for the collapse of the marriage.
The court is more likely to accept a “just and right” arrangement if both parties agree to it. It is customary for the spouse who receives the property to be accountable for any associated debt (for example, a car payment, or mortgage).
Can You DIY Dividing Property?
Technically, yes. However, it’s rather risky.
To keep control over the division of marital property and obligations, couples might enter into an agreement to do so. Some spouses may be able to distribute their assets without the help of a third party.
In the event that a couple is unable to come to an agreement, divorce mediation is an excellent choice. Mediation is typically mandated by the courts for divorced couples. As an alternative, spouses might seek the services of a private mediator.
A mediator serves as a neutral third party to help to divorce couples hash out any lingering concerns. People may mediate face-to-face or over the internet. It’s up to the mediator to counsel and recommend to the couple during mediation what issues they should discuss.
No judgments are made by the mediator, and no legal advice is given. The mediator will usually prepare a property settlement agreement for the parties to sign and submit to the court if they come to an agreement on how to split their property and debt.
If the mediation process fails and the couple is unable to come to an agreement on how to split their assets and liabilities, one of the partners may ask the court for assistance. At this point, you’ll want to visit Right Lawyers here.
Due to the fact that mediation is a secret process, neither partner may utilize anything spoken or discussed during the mediation to their disadvantage.
Dividing Property After Divorce: Simplified
Regardless of how you decide to conclude your divorce, knowing the fundamental legal standards may assist you in making well-informed judgments. We hope that our guide has shed some light on community property and separate property.
And, if you’re still looking for more information, you should check out our legal section. You’ll find additional resources and explainers that should ease the burden of deciphering legalese.
