Commingling Property in Divorce

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 How is Property Divided During a Divorce?

The California Courts self-help center divides the marital property into two categories. The judge will decide based on each case for the property division during a divorce. It will be either separate or community property on many court forms. These are important to understand because this is how a court will decide how to divide your property. In general, you keep your separate property and split your community property.

Community property: Also known as quasi-community property. What you each own or owe individually from before you married or after you separated, and any gifts or inheritance. In general, it is important to know your date of separation. You need to know when you are married and when you are separated to figure out what is considered separate property and what is community property. The day of your marriage is typically easy to figure out. Separation can be more complicated to pinpoint.

For instance, to figure out the date of separation you can collect the following information:

  • The day that one of you let the other one know (by actions or words) that they wanted to end your marriage and;
  • After that day, your or their actions were consistent with wanting to end your marriage.

For some people, this is typically the day they move out. For others, this is a day the two spouses agreed together that their marriage was over, and they made plans to divorce. Usually, from that day forward, what you or your spouse earned or loans you took out are no longer considered community property.

According to the American Bar Association, if the spouses can reach a fair agreement on their own, a judge will approve it after a short hearing. In a relatively small number of cases where the spouses cannot agree, the court will have to split the property. Depending on each state, it will establish what factors the judge will consider when dividing property.

As a starting point, many states permit parties to keep their nonmarital or separate property. Nonmarital property includes property that a spouse brought into the marriage, kept in his or her name during the marriage, and did not commingle with marital property.

Commingling property occurs, for example, if the property was put in the same bank account as marital property. For instance, if you owned a home before you got married and you never changed the title to include your spouse and did not put marital money into the house for renovation and upkeep, the house will likely be considered nonmarital property.

The nonmarital property also includes inheritances received and maintained separately during the marriage. It may additionally include gifts to just one spouse during the marriage. Some courts may divide nonmarital property during a divorce, but its status as the nonmarital property will play some role in determining how it is divided.

What is Marital Property?

Marital property is anything earned or bought during the marriage. This typically includes houses, land, vehicles, money, retirement accounts, pensions, household goods, furniture, snow machines, four-wheelers, and each spouse’s personal property. In divorce and dissolution cases, people often mean property and debt when they refer to property.

But the following are not considered marital property therefore the court will not divide them, unless one spouse did something that changed the premarital item to marital:

  • Inheritance;
  • Gifts to one spouse (engagement ring);
  • Premarital assets;
  • Property acquired during marriage solely from separate sources;
  • Social Security benefits;
  • Military disability payments and;
  • Post-separation credit card debt is not marital debt because one spouse had no other way to support him or herself.

How Do Courts Divide Marital or Community Property?

The answer varies from state to state. A few states, such as California, take a rather simple approach: they believe that property should be divided equally. In these states, the net value of all marital property and debts will be divided fifty-fifty, unless a premarital agreement states otherwise. But, most states apply a concept known as equitable distribution. Equitable distribution does not imply equal distribution.

This means that the court will divide marital property in a way that it deems is fair. The division of property may be fifty-fifty, sixty-forty, seventy-thirty, or what the court decides is justified. In some cases, one spouse may even obtain all of the property, with nothing awarded to the other, though such situations are rare. In cases in which a court is applying equitable distribution, the court will examine a variety of factors and will not necessarily weigh all of them equally.

This provides the judge with more leeway and allows more consideration of the financial situation of both spouses after the divorce. However, it also makes the division of property less predictable. There are several factors courts consider when applying the principles of equitable distribution, including:

  • Nonmarital Property: If one spouse has significantly more nonmarital property than the other, the court may award more marital property to the less-wealthy spouse;
  • Earning Power: If one spouse has more earning power than the other, the court may award more marital property to the spouse with less earning power;
  • Who Earned the Property: When awarding property, usually courts will favor the party who worked hard to acquire or maintain the property;
  • Services as a Homemaker: Courts realize that keeping a home and raising children is challenging and that homemaking services often enable the spouse to work outside the home to earn more money. Thus, homemaking services may weigh in favor of the homemaker;
  • Waste and Dissipation: If one spouse wasted money during the marriage, it could be against him or her when the court divides the property. Examples include excessive spending and money spent on an addiction;
  • Fault: Some states will take into consideration fault, as in the case of spousal abuse or marital infidelity, but most do not consider such things when it comes to property division;
  • Duration of Marriage: A longer marriage may weigh in favor of a larger property award to the spouse with less wealth or earning power and;
  • Age and Health of the Parties: If one spouse is in poor health or is much older than the other, the court may award a larger amount to the sicker or older spouse.

Who Will Receive the Residential Home?

According to the American Bar Association, the decision of who receives the house depends on the situation. If you have minor children and can afford to keep the house, the law typically favors awarding the house to the spouse who will have physical custody of the children most of the time.

If you cannot afford to keep the house, it may be sold and the proceeds divided or given to one party. In some cases, a middle-ground approach is applied, meaning that the spouse who has custody of the children will have a right to live in the house for a certain number of years. At the end of that timeframe, that spouse will buy out the other spouse’s interest or sell the house and divide the proceeds.

When Do I Need to Contact a Lawyer?

If you are getting a divorce and have issues regarding the property, it is recommended to seek out a local divorce attorney. This can help keep the situation from getting more complicated in the future.

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