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Divorce: Property Division

Mark Dombeck, Ph.D.

piles of coinsDivorcing couples must decide how their jointly held property and debt will be divided before their divorce can become final. State laws vary regarding property division in divorce, so it is a good idea for divorcing couples to educate themselves with regard to their state law, and to work with state licensed divorce professionals during their divorce process.

Process of Property and Debt Division

Before property and debt can be divided, it must be first inventoried and appraised:

  • Each spouse's income should be accurately reported.
  • If one or both of the divorcing partners have ownership of income producing (or tax sheltering) assets like a business, or intellectual property, such ownership should be reported and appraised.
  • All bank, investment and retirement account balances should be reported. Who has access to what money in these accounts should also be recorded. Additionally, each partner should verify that no monies have been removed from joint accounts without their knowledge and consent.
  • All debts should be reported.
  • If a house or other real estate properties are owned, the current value of those properties needs to be assessed, and the amount left on the mortgage(s) for that property (if any) needs to be figured out.
  • Other owned property of value (automobiles/trucks, boats, jewelry, collectibles, household goods, furniture, art, etc.) should be cataloged, and the value of each item should be assessed or otherwise agreed upon.

Division of property and debt is a fundamental part of the divorce process; if the divorcing couple cannot agree on how property is to be divided, the courts will ultimately impose an agreement on that couple, at the couples' expense. For this reason, divorcing couples are best off making their own property and debt inventories and jointly deciding on how property and debt should be divided. The objective third-party assistance of a mediator should be sought if serious disagreements on how property should be divided are encountered. Only as a last resort should divorcing couples consider having their lawyers battle each other in court en route to a settlement.

When lawyers do become involved with the property division process, they follow a well worked out legal process of discovery to identify hidden assets for the benefit of their clients. Lawyers generate and send "interrogatories" (formal question sets) and "requests for documents" to opponent lawyers who are then required to answer the questions and/or produce requested documents within a set period of time. They compel testimony of witnesses who conceivably can inform the court about the circumstances of the divorce and then submit their statements to the court, in a process known as "deposition". They can also, on behalf of their client spouse, compel the opponent spouse to answer true or false to prepared statements and submit the resulting documents to the court in support of the client spouse's case in a process called "request for admission". The discovery process is very expensive, in terms of money, time and emotion. It is available for divorcing couples who aren't on speaking terms, or who cannot find a way to avoid making the property division chore into a court battle.

State Law Differences

The individual states comprising the United States of America generally can be divided into two camps depending on how their laws handle the division of marital property and debt. The majority fall into the "Equitable Distribution" camp, while a select few others fall into the "Community Property" camp.

Equitable Distribution is somewhat of a misnomer, as it would appear to imply that states subscribing to this philosophy intend that divorcing couples should divide their property equally. This is not the case. Rather, in equitable distribution states the court examines the information available to it concerning the divorcing couple, including each partner's income and employment prospects, custody arrangements if children are involved, and what property was owned by each partner prior to the marriage, and then attempts to divide property in a way that it finds to be fair and just in light of this information. The decision might be for a 50/50 division, but it might just as likely be for a 60/40 division, or a 75/25 division.

Unlike equitable distribution states, Community Property states (including Arizona, Louisiana, New Mexico, California, Idaho, Washington, Wisconsin, Texas and Nevada) start with the assumption that property and debt should be equally divided amongst the partners without regard to their different needs, responsibilities or earning powers. Assuming there is property to divide and not just debt, this arrangement tends to favor the spouse with less earning potential and less means.

Courts have flexibility with regard to how they determine property division so long as they do not contradict the laws of their respective states. Community property and equitable distribution philosophies function as guidelines for division of property and debt in the event that divorcing couples are unable to come to terms on their own. When partners can agree to a division of property that the court does not find otherwise objectionable, the court is likely to endorse that division of property. Also, some categories of property and debt are often exempted from division. When, for instance, property or debt was clearly owned by one of the partners prior to the marriage, there is often a strong bias towards that partner keeping that property or debt.