Settling Your Divorce: Equitable Property Distribution Vs. Community Property
Depending on the state in which you live, the assets you and your spouse own will be divided up in one of two ways. In equitable property states, your assets and debts are divided up into what is deemed fair for each person. In community property states, everything you own is divided in half for each party. What you end up settling for in a divorce can depend on a number of factors in an equitable property state, while community property is simply divided equally.
How Assets are Decided in an Equitable Property State
Each spouse may receive between one third and two thirds of the total assets acquired during the marriage. Marital property is considered any property that is earned during the time the couple was married. If one party contributed to the marriage financially, while the other was home raising children, both are seen as contributors to the marriage as a whole. Earning potential is a factor when considering asset distribution, and generally the parent who has less of an earning potential may receive more of the assets in an equitable distribution state.
When an Inheritance Occurs During the Marriage
If one party in a marriage gets an inheritance, this is considered separate property at the time of the inheritance. What the person does next with the money will determine what becomes marital property and what stays separate property. If the inheritor takes the lump sum of their inheritance and puts it in a joint bank account that both parties have equal access to, the inheritance becomes marital property. If the person takes $10,000 and puts it in the joint bank account, but keeps $90,000 in an individually held account, only the $10,000 is considered marital property. If the entire inheritance is left in an account with only the inheritor's name on it, the inheritance remains separate property and is not subject to division.
Dividing Retirement Accounts
If one spouse had a sizable retirement account prior to getting married, that money remains their separate property. Any money put into the retirement account during the length of the marriage is considered marital property, including any interest earned during the time the couple was together. When one spouse stays home raising children and the other is busy putting money into a retirement account because they are employed, the money is divided between the two spouses, as they have both contributed to the marriage.
For more help with understanding divorce law, contact a local family lawyer.