The way property is divided in divorce depends upon the state in which you live. All states are either equitable distribution states, or community property states.
Equitable Distribution States
In equitable distribution states, your marital property is divided “equitably” when you divorce. Dividing property equitably does not necessarily mean that it is divided equally. Dividing property “equitably” just means that you divide it fairly.
In order to determine what is “fair” a court will normally look at all of the facts and circumstances of your case. It will look at all of your marital and non-marital property. It may also take into consideration your assets and your debts, as well as your income and expenses.
An “equitable distribution” of your marital property may be a 50/50 split, a 60/40 split, or something else. Normally, your non-marital property remains your sole property – it is not typically divided in your divorce.
Marital Property v. Non-Marital Property
In equitable distribution states, all of your property is classified as either marital or non-marital. In general, all property you earn or acquire during your marriage is marital property.
Property that you had before you were married is generally your non-marital property. Property you acquire after your marriage by gift or inheritance is also generally non-marital property. Non-marital property is normally deemed to be your sole and separate property. It is not divided in your divorce, unless you have commingled it.
Gifting Property and Commingled Property
Combining your non-marital property with marital property is called “commingling” it. Putting your non-marital property into joint ownership with your spouse may also be considered as a gift to the marriage. This is how it works.
If you inherit money, but you deposit it into a joint bank account with your spouse, you may be deemed to have made a gift to your spouse of the money. If you then deposit marital money (i.e. your paycheck) into that same account, and you take out money to pay your bills, you will be “commingling” your marital and non-marital money. When you do that, your non-marital money can stop being your separate money and turn into marital property.
Community Property States
In community property states, all property that you earn or acquire during your marriage is deemed to be community property. When you divorce, your community property is generally (but not always) divided 50/50. Even in community property states. a judge may consider the facts and circumstances of your case in determining how property should be divided in divorce.
Community property states do not distinguish between “marital” and “non-marital” property. Instead, they distinguish between “community property” and “separate property.”
All property you earn or acquire during your marriage is community property. Property you had before you were married, or that you received by gift or inheritance during your marriage is generally deemed to be your separate property … unless you transfer (or “commingle”) that property with property that you earned or acquired during your marriage.
Currently, nine states and Puerto Rico are community property states. Those nine states are:
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. All other states are equitable distribution states.
The Effect of Pre-Nuptial Agreements
No matter where you live, if you and your spouse enter into a valid prenuptial agreement, you can agree to change the way your property will be distributed in the event you divorce.
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