It's up to you and your spouse if you reach a settlement
How a court may divide, and award marital property will depend on the state that is legally processing your divorce. Know that you and your spouse can generally negotiate the terms of your settlement, to include the division of debts and assets (such as credit card debts, your home and retirement accounts) as you like. The laws of your state may provide a basis for what you each deem is fair based on your individual chances of a court ruling.
However, your state's property distribution laws affect your Final Judgement of Divorce more specifically when the court decides the outcome.
Below, find information regarding differences between community property states and equitable distribution states along with general information about the impact separate property has on your judgement.
Know that in most cases a premarital or post marital agreement will supersede these legal guidelines.
DISCLAIMER: While DMK provides this information so that you may gain insight into basic divorce facts so that you may have more knowledgeable discussion with your legal, financial and tax advisors rather than in place of professional advice. Laws vary in every state and change frequently. Speak with an attorney in the state where you plan to seek your divorce for legal advice specific to your situation and state divorce laws.
Community Property States
There are currently 9 community property states and 3 "opt-in" states. They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington. Alaska, South Dakota and Tennessee offer an "opt-in" to a modified community property option whereas specific assets may be transferred into a valid community property trust. All other states are equitable distribution states.
While each of the community property states have some variances to their community property laws, they generally follow the same basis of ownership in that the married couple owns everything similar to that in a business partnership. All property acquired during the marriage is considered community property (jointly owned). It does not include gifts or property received during the marriage deemed only for one spouse and does not include separate money or assets that were owned individually by either spouse before the marriage.
If separate money was used to purchase the home, then the spouse who contributed that money may be entitled to reimbursement. If a spouse used community property money for the home that was owned as separate property, the other spouse may also be entitled to reimbursement. In divorce, community property is divided equally (in half) between the two spouses.
However, in most community property states a judge has the authority to divide community assets such as a marital home equitably. This means that if the court deems one spouse would be given an unfair distribution with 50% then a fair division could be established that may result in one spouse receiving more or less than a 50% split. In some community property states, if the court establishes one spouse is at fault in ending the marriage, the court has the authority to award that spouse less than 50%. (Equitable distribution exceptions do not apply in California.)
Equitable Distribution States
The majority of the states are equitable distribution states and follow the guidelines of equitable distribution which means all of the property that was acquired during marriage (marital property) will be divided fairly between the two spouses. The court has the discretion to determine an equitable division between the two spouses whereas one spouse may get more than 50% of the marital home's value (along with other marital property) resulting in the other getting less. Therefore, equitable division of assets, like a home, is not always even (50/50) distribution, instead it's considered fair distribution.
Separate Property
Generally, property acquired before you were married, is considered separate property.
A home that was owned prior to the marriage, inherited, given to only one spouse before or during marriage, acquired after permanent separation or purchased with premarital income or funds acquired from a separately owned premarital home/asset, generally remains as separate property. The state's property distribution laws will not affect the asset. It will continue to be owned by the originating spouse.
However, separate property may affect the judge's ruling, but it is not subject to division as marital property. In some states, each spouse's economic status and value of their separate property MUST be considered when equitably distributing the couple's assets and debts and/or deciding other terms of the judgement for dissolution.
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