Some states follow community property rules and other states follow equitable distribution rules to divide assets during a divorce. However, regardless of state rules, math generally equals half.
Fighting the “half” is not productive. Instead, you should familiarize yourself with what needs to be divided in half. Courts cannot share half of your separate property with your spouse. Finding out which property is separate is the magic of a good divorce attorney.
Separate Property or Community Property
Separate property is “separate” and not part of the half being divided. It consists of things like property a spouse bought before the marriage, a spouse’s inheritance, and gifts during the marriage given as separate property. However, if you have separate property and use the money earned during the union to maintain it, then it is considered community property. Also, when you deposit money given as an inheritance into a joint bank account, it is considered community property.
Community property is divided equally by the courts between the spouses during a divorce. This includes real estate, 401Ks, pensions, businesses, and debt. Equitable distribution means that the court looks at several things to ensure that each spouse receives the same liabilities and assets. It may be considered in situations where one spouse does not work, there has been a long marriage, or one spouse’s income is significantly higher than the other’s. Community property states may also defer to these issues.
401K Gold IRA Split
In community property states, retirement accounts such as 401Ks and IRAs are generally divided equally between spouses during a divorce. In an equitable distribution state, the judge hearing the case will decide what is fair or equitable but not necessarily equal. Keep in mind that spouses have the right to make agreements about who will receive assets like IRAs and 401Ks. It is not unusual for compromises to be made during a divorce. For example, a spouse may request to keep the entire 401K in exchange for another asset. If he decides to do this, it is important to have a divorce attorney draw up a marriage settlement agreement.
split a business
Both spouses have property rights in the divorce. Whether it’s a retail business, a doctor’s office, or a restaurant, there are probably community ownership interests. The professional business is the typical case with which we see more problems. A professional business is when one spouse is in business as a doctor, accountant, or lawyer. There is value in the business that must be divided.
Basically, there are three methods of running a business in a divorce: joint ownership, selling the business, or buying the other spouse’s interest. With joint ownership, both partners continue to own the business after the divorce. It is important to note that this method only works well if both spouses have a level of trust in each other’s management skills or a strong working relationship. If not, it can be a recipe for disaster.
There are pros and cons to selling the business and splitting the proceeds. On the plus side, spouses can avoid financial ties to each other and use the proceeds to launch their own business venture. The downside is that many companies are slow to sell. It can take months and even years to sell it.
Buying out the other spouse’s interest is when one spouse keeps the business and pays the other spouse’s interest. This works well when the buying spouse has enough liquid assets or cash for the transaction. In addition, other assets may be used to offset the purchase, such as securities, IRAs, and home equity.
Who gets the house?
You may want to keep the house because of the children or because you are emotionally attached. However, you need to think about what is really best in the long run. Not all spouses can maintain the same lifestyle after a divorce. It doesn’t matter how attached you are to your home, and whether or not you can afford to keep it is critical. You have to think about the mortgage, maintenance and property taxes. And if you don’t have the funds, serious financial problems may be on the horizon.
Is there equity in the house? If not, you’re not fighting for an asset, you’re fighting for a debt. Another important thing to consider is whose name is on the mortgage. The title is who owns the house, the title can be changed freely. The mortgage is the obligation, or debt of the house. We have never seen a mortgage company change the name or release one of the spouses from the obligation. Changing a mortgage requires a refinance, which requires credit approval.
In a community property state, judges are required to ensure that community property is divided as equitably as possible. If you bought a house together and it has an equity of $100,000, one spouse can get the house but has to buy the other spouse’s share for his share of $50,000. The judge can even order the house to be sold. Even if the house is in your name only, you are not allowed to sell it without court approval or your spouse’s consent.
split the debt
Debt is treated as an asset. It must be divided. The wrinkle is that debt holders are not bound by a divorce decree. So if you take on credit card debt in your name, the credit card can still haunt your spouse if you miss payments. We generally look for designated debtors to take on the debt. Sometimes this requires creative advocacy to achieve.
A good divorce attorney can educate you on your state’s rules regarding the division of property in a divorce. This legal professional can also provide good advice on how to handle community property and separate property during a divorce. If he tries to go it alone, he may give up something to which he is legally entitled.