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Divorce comes with the formidable task of dividing property acquired over the years of marriage. It’s quite difficult to share money and items equally. Furthermore, the emotional attachment to these possessions makes it even more difficult to part ways.
It’s not always a straightforward process, with everyone agreeing to their allotted share easily. Disputes are commonplace. Thus, it helps to know the dynamics of marital property division. You wouldn’t want to be caught off-guard or get an unfair share of what is rightfully yours. Moreover, you may need divorce and family law services for proper guidance on your legal rights. This guide fills you in on how to handle what’s at stake.
What is marital property?
First and foremost, it’s necessary to understand what marital property is. By definition, it’s all assets acquired during a marriage. It might be houses, cars, furniture, savings, or debt.
On the other hand, property owned before tying the knot is classed as separate property, such as individual gifts, inheritances, and property gained individually.
Only marital property is shared between the divorcing couples. Separate property goes to the respective owner. Knowing this helps you evade unnecessary misunderstandings.
The two types of marital property division strategies are equitable distribution and community property. For equitable distribution, courts aim at a fair apportionment to each spouse depending on several factors, like living standards enjoyed during marriage, earning potential, and contributions of each spouse to their partner’s career. On the other hand, community property aims at a 50-50 split, regardless of the contributions from each spouse.
Factors courts consider when dividing marital property
Courts take into consideration several factors when deciding which goes to whom. To begin with, they consider how long the two have been married. A 20-year union will be handled differently from a 2-year marriage.
For a long marriage, the assets have been significantly intertwined, and it may be difficult to say a particular item outrightly belongs to one of the partners. But for a marriage that has just lasted a couple of years, it’s much easier to define the owner of any given asset.
Another thing they look at is each partner’s financial situation. A spouse with a significantly higher income and earning potential may get a smaller share of the property because they can easily acquire more.
Non-financial contributions matter too. If one of the spouses stayed home to raise the kids while the other worked full-time, the courts will factor this in when dividing property. Some states divide property equally between the breadwinner and the homemaker.
Finally, a couple may have had some sort of agreement as to what will happen to each property upon divorce. Courts normally honor these prenuptial and postnuptial contracts as long as they were made in good faith. A firm grasp of these factors prepares you psychologically for what lies ahead, and you won’t run into surprises.
Typical mistakes to avoid
To reiterate, marital property division might be complicated. Knowing typical pitfalls to evade will help you get a fair bargain.
One mistake couples make is going to the courts without a definitive list of all the properties. Failure to list all assets may lead to unfair distribution. So make an effort to know all assets your spouse owns. Likewise, don’t hide anything from them. If the court gets wind of any indiscretion, it will have legal ramifications, like getting a smaller share.
Next, consider tax implications. Some decisions when dividing marital property attract taxes. For instance, if you sell a marital home to divide the cash, capital gains taxes may apply at a rate of 15% for income ranging from USD$89,250 to USD$553,850 and 20% for income above this range.
Also, you may have to remit taxes if you decide to split retirement accounts, divide stock portfolios, or transfer investment properties. Alimony payments may be taxable or deductible depending on state laws. It helps to divide the properties in a way that doesn’t add to the tax burden. At this time, you’d want to save as much as possible because divorce is already expensive and you may not know exactly what the future holds.
Another mistake is letting your emotions dictate decisions. It’s true the thought of parting ways with someone you’ve spent many years with may take a toll on you. However, acting irrationally may only worsen the situation. Seek ways to manage your anger and sadness so that all your decisions are made with a clear mind.
Finally, consider the long-term gains you stand to get rather than the immediate gains. For instance, you may want to keep the marital home to continue living in the neighborhood you’ve grown to love. However, if your income post-divorce can’t cater to the taxes, maintenance needs, and mortgage arrears, it wouldn’t be a financially sustainable move.
Impact on joint investments
Perhaps you were running a joint business until the divorce, as with Bill Gates and Melinda French. This means employees, partners, and customers are in the picture. Splitting such a venture may add to the complexities of marital property division. For this reason, you may need to employ experienced financial analysts for accurate valuations and advice on the best way forward.
Conclusion
Marital property division may worsen the pain of divorce because of the complexities involved. Your best bet is hiring a divorce attorney. They’ll help you understand your legal rights and get a fair share of what you’ve tirelessly worked for over the many years.
A financial planner may also come in handy to help you assess the options and make the most financially sound decision. Remember, it’s not all about splitting assets; you must safeguard your financial future. Understanding all these dynamics sets you up for a successful division process.
