Every state in the country enforces unique rules pertaining to divorce. When it comes to property division, states follow either equitable distribution or community property law. Only nine U.S. states enforce community property, and they include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. All other states uphold equitable distribution laws. If you are divorcing in the Midwest, it’s a good idea to understand equitable distribution laws. However, if you ever move to a community property state, you should understand how this form of property division works as well.
What Is Community Property Law?
Many people who go through a divorce in community property states find this property division law to be overly rigid and oftentimes unfair. Under the community property statute, all marital property is divided completely evenly. It does not matter if the spouses make vastly different incomes or hold different levels of separate property. Everything that qualifies as marital property in a community property state is subject to strict 50/50 division.
Under community property law, everything gained by either spouse during their marriage counts as community property. This includes assets and real property purchased in just one spouse’s name. If the asset in question was acquired during the marriage, the asset qualifies as community property and is subject to 50/50 division. This can lead to many difficult disputes in community property state divorce cases. A divorcing spouse may argue that the other’s separate property qualifies for division while it’s also possible for a spouse to argue that strict 50/50 division is unrealistic due to the nature of the couple’s assets.
Ultimately, community property laws are often challenging to address. If you live in a community property state or plan to move to one in the future, it’s essential to understand what this law will mean for your divorce.
What Is Equitable Distribution?
The remaining 41 U.S. states enforce equitable distribution laws. Under this property division law, the court must determine the most equitable division of marital property by evaluating several factors in the divorce. It’s important to understand that “equitable” does not necessarily mean “equal.” It’s possible for an equitable distribution divorce to result in 60/40, 70/30, 80/20, or an even more uneven distribution of marital property depending on the unique details of the divorce in question.
While many divorcing couples in equitable distribution states choose alternative dispute resolution to settle their divorces privately, those who litigate divorce should prepare for a difficult property division process. The judge handling the divorce will review various factors, including each spouse’s income, job prospects, education, and contributions made toward the other spouse’s career. They will also evaluate household services and childcare provided during the marriage and each spouse’s noneconomic contributions to their marriage.
Preparing for Property Division in Divorce
No matter what your state’s law is regarding property division, if you are planning to divorce, you need to prepare for the financial disclosure aspect of divorce. Financial disclosure entails providing the court with complete and accurate financial records that fully detail your separate and marital property records. Your financial disclosure packet may include years of bank statements, stock portfolio records, business asset records, cryptocurrency records, deeds, titles, and other certificates of ownership for your various assets.
An experienced divorce attorney is the best resource to consult if you aren’t sure how to prepare your financial disclosure statement. Your attorney can review your financial situation and help you gather the records you must provide for financial disclosure. They can also assist you in determining the best approach to your divorce. For example, if you live in an equitable distribution state, pursuing alternative dispute resolution is likely to benefit both you and your spouse. You’ll be more likely to reach a mutually agreeable property division resolution through private settlement. If you litigate, the judge has the final say on every aspect of your divorce.
Penalties for Lying in Financial Disclosure
Regardless of whether you live in an equitable distribution state or a state that enforces community property law, be honest in your financial disclosure statement. If you intentionally leave out any pertinent information, illegally interfere with marital assets in any way to hurt your spouse, or attempt to hide any assets, you could face contempt of court and severe legal penalties.
If you suspect your spouse has lied in their financial disclosure statement, notify your attorney about your concerns. They may be able to arrange a forensic account investigation to trace your spouse’s financial records. The penalties for hiding assets in property division proceedings include contempt of court, fines, and possibly even jail time. The spouse who attempted this will also likely face liability for the other spouse’s civil damages and attorneys’ fees.
Long-Term Financial Effects of Divorce
Your divorce is likely to influence your life in several ways for years to come. Depending on the nature of your financial situation with your spouse, you may be able to resolve property division without the need for any ongoing financial agreements. However, if you have children together, child support is likely to come into play in your divorce. Additionally, if one of you earns significantly more income than the other, spousal support may also become a factor in your divorce.
If your divorce order includes any ongoing financial agreements between you and your ex-spouse, you must abide by these terms carefully. If you experience significant changes in your life that render your current divorce order untenable, you may be able to petition for modification of your divorce order with the help of an attorney.
While most people are aware of the common financial issues that divorce entails, they may have trouble anticipating and preparing for the long-term impact their divorce is likely to have on their life. One of the best things anyone can do to prepare for property division and the long-term financial impact of divorce is to hire an experienced divorce attorney. Your legal team will not only assist you in completing your financial disclosure statement but also provide ongoing support as you work through the issues your divorce entails. Contact an experienced divorce attorney once you’ve made the decision to divorce to ensure the best possible outcome for your case.