Divorce is a challenging life period often complicated by emotional upheaval and tough decisions with long-lasting effects. Asset splitting is one of the most important choices spouses need to make during marriage dissolution. However, it is often unclear how to divide assets in a divorce, either due to the lack of legal knowledge or the inner turmoil tied to a breakup. Still, making well-informed and mature decisions is paramount.
By dividing assets in divorce, a couple not only handles the distribution of belongings at the present moment but also creates a basis for financial stability in the future once they start living separately. Therefore, it is worth the effort to approach this process seriously and cold-headedly.
Spouses may hire an expert to guide them through the matter, which is especially reasonable if there are lots of items to deal with. However, some people still want to understand the ins and outs of distributing assets themselves first. If you share such a perspective, you can start with this informative article.
We have described the core principles of property division in a divorce, who gets what, and how to get divorced without splitting assets. We also explain the key regulations in equitable and community property states and why it is better to settle disputes outside the courtroom.
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Splitting Assets in a Divorce: Property Agreements vs. Going to Trial
When splitting assets in a divorce, spouses have two main avenues: discuss their situation and reach a property agreement amicably or go to trial and let the judge make a final decision. Each option may be more fitting in specific circumstances. The most crucial aspects to focus on when deciding how to split assets in a divorce are the complexity and variety of assets, the level of conflicts between spouses, and their desire to negotiate.
Property Agreements
When splitting assets in a divorce, spouses can greatly simplify and speed up the whole process if they manage to reach a property settlement agreement. By going this way, partners need to determine how their joint property will be divided without involving the judge. Sometimes, they may consult an attorney or a mediator who will answer the question, “How are assets divided in a divorce?” and help them resolve their disputes to end up with a fair outcome. Besides making the divorce procedure faster, this approach has other beneficial features:
- Control & Flexibility. By negotiating a property agreement, couples can retain control over the process. In fact, they can tailor the division of assets to their specific demands and needs, concentrating on unique circumstances such as the earning capacity of every spouse, involvement in childrearing, etc.
- Lower Expenses. Generally, couples applying for an uncontested divorce and submitting a signed agreement with their ruling on asset division spend less than those delegating decision-making to the judge. For instance, an uncontested divorce in California costs $600-$900 on average. On the contrary, the price of a contested marriage dissolution in the state may exceed $12,000.
- Privacy. Settlement agreements usually remain private. This fact can be crucial for couples with many valuable assets or those wanting to conceal their financial matters from the public during a divorce.
- Reduced Stress. When spouses reach an agreement on divorce-related matters without litigation, they may forget about the anxiety and conflicts usually tied to it. Such a position is extremely beneficial when partners have kids, as they can reduce the overall emotional toll on children.
Still, couples often can’t reach a consensus on how to distribute their marital assets. There is no other choice but to participate in court hearings.
Going to Trial
Cases when spouses go to trial to resolve their disputes are classified as a contested divorce. Though this option is more adversarial, it may be necessary when:
- The parties aren’t willing to cooperate. When one spouse initially doesn’t want to divorce or feels hurt and vindictive because of their partner’s behavior, finding common ground on divorce, splitting assets, and related topics is extremely difficult. In such a situation, having an authorized third party conclude how assets must be divided may be better.
- There are complex assets that cause disagreements. When a couple has to divide extensive, very pricey, or complex assets, such as businesses, real estate, or investments, the expertise of a judge may be required to ensure a fair and equitable division. In such cases, the court may assess the value of various assets, consider prenuptial agreements, if any, evaluate each spouse’s contribution to the acquisition and growth of these assets, and gauge each party’s probable financial needs after divorce.
When going through litigation, you will likely wait longer to finalize your divorce. That’s why many couples do their best to resolve disputes before applying for marriage dissolution and proceed with uncontested divorce. Unfortunately, a trial is unavoidable if any misunderstandings about asset splitting arise and spouses don’t want to compromise.
How Do State Laws Affect the Division of Property and Debts in Divorce?
State laws play a crucial role in the procedure of splitting assets. In the United States, there are 2 common answers to “How are things split in a divorce?” based on how the property is classified: community property and equitable distribution. Currently, 9 states stick to a 50/50 division system. The rest of the states adhere to the second approach, aiming to divide assets fairly, though not necessarily equally.
Still, deviations from general rules are possible due to unique specifics of divorce, money split preferences, and other factors. Therefore, if you are going to create a settlement agreement and wonder, “How is money split in a divorce?”, it may be a good idea to consult a lawyer or a financial advisor. An expert will analyze your case and suggest the best possible variant to reach a just outcome.
Equitable Property Division in a Divorce
The main idea behind divorce and the division of property in equitable distribution states is to achieve fairness rather than strict equality. Therefore, when a divorce case gets to the court, the judge will consider the following factors to come up with an objective decision:
- The duration of the marriage
- Financial contribution of each spouse
- Respective earning capacities of partners
- Individual needs
- Non-financial inputs during marriage, e.g., homemaking and child upbringing responsibilities
Let’s consider a couple who decided to divorce after 12 years in a marriage as an example. During all this time, a husband worked in a successful company and earned enough to support the family. His wife stayed at home and raised their 3 kids. Though the husband made a significant financial input into the marital estate, the judge will still recognize the wife’s efforts as a homemaker and primary caregiver as an equally valuable contribution. Based on equitable principles of splitting property, the court will consider the wife’s sacrifices in a professional realm and can allocate a larger share of marital assets for her to have financial stability after divorce.
The same is true for situations when both spouses work but have a big salary discrepancy. A person with a higher income may eventually get a smaller part of marital assets. The other spouse will receive a bigger percentage of joint property not to experience financial difficulties post-divorce.
So, how is property divided in a divorce if you live in an equitable distribution state? It is split fairly.
Dividing Assets in Community Property States
In states that adhere to community property laws, such as California, the court follows a distinct set of rules when handling divorce, division of assets, and allocation of debts. The key principle in such jurisdictions is that all assets accumulated during the marriage are owned equally by both spouses. It doesn’t matter which spouse actually accrued them or whose name is on the title. Therefore, all money, property, and debts are qualified as mutual belongings and responsibilities.
So, when spouses start a marriage dissolution process in any of the 9 community property states and wonder how assets are divided in a divorce, the common answer is that they are split 50/50.
For instance, a couple wants to divorce after 8 years of living together. They bought a house during their marriage and made equal mortgage payments. Besides, they have joint savings and retirement accounts. In this case, all their assets gathered during marriage are treated as community property that must be divided equally.
Still, when considering how to divide assets in a divorce, make sure you are managing joint assets, which are subject to community property laws, not separate possessions such as:
- Real estate, vehicles, or investments owned before the marriage
- Assets inherited or passed down through family lines
- Gifts received by a spouse from someone outside the marriage
Besides, in some jurisdictions, if either spouse accrues assets after the separation date, such items are perceived as separate property.
Another thing to remember is that some community property states are becoming more flexible in dividing marital assets during a divorce. For example, judges in California may consider the specifics of the case and the economic situation of each spouse and step aside a traditional 50/50 distribution to achieve what seems to be a fair decision.
How Is Your House Divided in a Divorce?
For many couples, a marital house is usually the most significant and emotionally important asset. People may perceive it as a secure place full of sweet memories. So, when the question “How to split a house in a divorce?” arises, spouses must be very coordinated, forward-thinking, and considerate.
First of all, the status of the house must be defined. If partners bought it together in the marriage, it is a joint property, and each party has the right to own it. In such cases, they can choose any of the listed solutions:
- Sell the house and divide the money. It is one of the most common decisions as spouses can get proceeds and divide them into halves. By choosing this straightforward approach, they can avoid conflicts and have a clear start separately.
- One spouse may buy out the other’s share of the house. In this case, a couple should hire a professional appraiser to learn the exact cost of their house. After that, they can reach a property settlement in a divorce, indicating the buyout amount. This method is advantageous if spouses have kids who would benefit from living in a customary environment. However, the spouse who plans to live in a family home should think twice about whether they will be able to cover upkeep costs on their own. For instance, the average annual home maintenance and repair expenses in California are around $17,000.
- Co-ownership or deferred sale. Sometimes, couples choose to continue co-owning the house, e.g., until their kids are underage, and then sell it later. However, such a plan may work out if parents clearly determine their responsibilities, expenses, and other details of property co-ownership.
There is no one-size-fits-all variant for splitting a house in a divorce. However, when discussing possible variants and completing a divorce property settlement agreement, it’s highly advisable to consider the well-being and stability of children, the desires and preferences of each spouse, financial obligations, tax implications, and current market value.
Can You Get Divorced Without Splitting Your Assets?
Generally, a couple has to divide marital assets during a divorce, which is a fundamental step of the process, just like debt division or child custody arrangements. By splitting joint assets, spouses protect their rights and build the ground for financial stability in the future.
However, if you google “Can you divorce without spitting assets?”, you will get a positive answer. In short, a divorce without splitting assets may be a viable option in certain circumstances:
- In some states, including California, judges have the authority to grant what are known as status-only divorces. For example, if one spouse applies for it to remarry sooner or because of very lengthy divorce litigation, there may be a separate hearing called a “bifurcated trial.” Therefore, a divorce will be finalized, but other divorce-related matters, such as asset division, will be resolved later.
- If your spouse and the property in question are in one state, but you file for marriage dissolution in another, you can divorce without dividing assets. To be more precise, you will proceed with the divorce in your state and will have to initiate a separate legal process in the other state to request orders regarding the division of your marital assets.
How to Reach a Property Agreement in a Divorce?
Reaching property settlements in a divorce may be hard, but if you manage to do so, your divorce will be cheaper, quicker, and more peaceful. If you are at the stage of negotiating your divorce settlement agreement, take advantage of these tips:
- Start discussing possible solutions as soon as possible to have ample time for dialogues, bargaining, and decision-making.
- Be open and honest so that you both have a clear idea about joint assets and debts.
- List and describe all marital assets.
- Define which assets are most important to each of you. Compromise whenever possible.
- Prioritize fairness.
- Keep your future financial needs in mind.
- Consult financial advisors, accountants, or appraisers to understand the real value of your possessions.
- Consult divorce attorneys to understand your rights, obligations, and options for property division.
- Engage a mediator to facilitate discussion if needed.
- Put your agreement in writing and sign the paper to prevent future misunderstandings or disputes.