Divorce is a difficult and emotionally stressful process for everyone who experiences it. While your impending divorce may involve a child custody determination and other sensitive personal issues, property division is likely to be a major point of contention in your divorce case. If you are preparing for a divorce, it’s vital to not only know your state’s laws pertaining to property division but also the value of legal representation as you navigate this challenging process.
Divorce entails not only the end of a marriage contract but also the establishment of separate property ownership rights over the divorcing couple’s shared assets. Additionally, the couple must also assume individual responsibility for their respective shares of marital debt. As you prepare for your divorce, take time to research the property division laws for your state and evaluate the financial issues you and your spouse will need to settle.
Community Property vs. Equitable Distribution
There are two main forms of property division laws enforced in the United States: community property laws, which require divorcing spouses to equally divide all of their marital assets 50/50, and equitable distribution laws, which aim for the most equitable, but not necessarily equal, division of marital property in divorce. Only nine US states enforce community property: Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin. All other US states are equitable distribution states with the exception of Alaska, where divorcing spouses have the option of declaring property as marital property.
Community property states are far stricter when it comes to property division. Regardless of the underlying reason for the divorce, the spouses must disclose all of their financial records to establish separate property ownership rights and define the scope of their marital property subject to division. Equitable distribution is a bit more flexible but also more complex. When a judge decides property division in an equitable distribution state, they must evaluate various factors to arrive at the most equitable possible division of marital property.
Separate Property vs. Marital Property
Property classification is essential in any divorce case. In almost every divorce, each spouse will have the right to maintain ownership over their separate property. “Separate” property includes anything owned prior to marriage, gifts, and inheritance. “Marital” property is anything jointly owned or earned by the spouses during their marriage. This can include income earned by both spouses while they were married, investments purchased during the marriage, and appreciation in asset value over the course of the marriage.
Identification and classification of property are the two first steps in the property division process in any divorce case. If you are unsure whether a particular asset or piece of property qualifies as separate or marital property, consult your attorney. They can assist you in gathering all of the records and supplemental documentation you will need to provide for your property division proceedings.
Financial Disclosure in Divorce
Financial disclosure is an essential facet of any divorce. Both spouses must provide complete and accurate financial records so they can identify, classify, and evaluate all assets and debts they control. Conducting proper financial disclosure can be very difficult, especially if you are unsure how to obtain the records you need to produce for your divorce. This is another reason why it is crucial to hire an experienced divorce lawyer to assist with your case.
Your attorney can help you gather the evidence you need to establish your separate property ownership rights. They can also assist you if you believe that property your spouse has declared as their separate property actually qualifies as marital property. The legal concept of “transmutation” can come into play if one spouse’s efforts and contributions toward an asset significantly increased its value. For example, if your spouse owned your marital home before you married but you contributed to significant renovations that substantially increased the property value, you could have valid grounds to claim the house transmuted to marital property.
Penalties for Hiding Assets
While you may hate the idea of splitting property with your soon-to-be ex-spouse, do not give into the temptation of attempting to hide assets. Some divorcing spouses will make bogus loans to friends, ask their bosses to defer bonuses and commission checks, and they may even try to siphon cash from shared accounts prior to their divorce. All of these actions can lead to severe penalties.
If you believe your spouse has failed to provide complete and accurate financial records in your divorce, notify your attorney of your concerns immediately. They can potentially offer several possible options for resolving the matter, such as hiring a forensic accountant or other financial expert witness to perform a thorough evaluation of your spouse’s financial disclosure statement and records to identify any discrepancies. If the judge learns that one of the divorcing spouses attempted to hide assets from property division, that spouse will likely face contempt of court. They may even face criminal prosecution for perjury if they knowingly lied in a sworn statement. Depending on the scope of their financial obfuscation, they could qualify for fraud charges.
How an Attorney Can Help with Property Division
The right attorney can make a tremendous positive impact on your property division proceedings. Since this aspect of your divorce is likely to be one of the most contentious issues you will face throughout the process, having reliable support from an experienced attorney is an invaluable asset. Your attorney can not only assist you in completing your financial disclosure statement and addressing any discovered inconsistencies with your spouse’s statement but also help you make more informed decisions when it comes to your property division determination.
If you live in an equitable distribution state, the outcome of your property division determination may not be exactly 50/50. There could be significant room for negotiation, and it’s possible for you and your spouse to reach a mutually agreeable property division resolution through alternative dispute resolution. Ultimately, there is no single solution to resolving property division in divorce, and it’s vital to consider all of your available options if you want to secure the best possible outcome. If you are worried about the potential outcome of property division in your impending divorce case, consult an experienced divorce attorney as soon as possible.