When spouses get a legal separation or a divorce, it is common for them to divide their property either through a mutual agreement or after court proceedings. When they are taken into court, these types of disputes dealt with include property that is shared between the spouses and the property that is considered separate property of each spouse.
As these property determinations are made in court, any property that is deemed to be separate property will not be relevant to the proceedings. This is because it belongs to the spouse whose separate property it is and, in general, will not be subject to division by the court.
Shared property belongs to both of the spouses and the future owner of that property will be determined by the court.
What Property Is Commonly Classified as Shared Property?
Examples of common types of shared property in the context of a separation or a divorce include:
- The marital home that is in the name of the spouses;
- The family chattels, even if they are in one spouse’s name, which include items such as:
- household equipment and appliances;
- vehicles; and
- Any common or jointly-owned property;
- Property acquired before the marriage relationship began, if that property was intended for the couple’s common use or benefit;
- All earned income and property obtained after the marriage relationship began; and
- The value added during the marriage to life insurance policies and superannuation.
Therefore, the timeline of a marriage will be a major factor when determining whether to classify property as separate or shared. In certain situations, property that is acquired during a marriage will be considered shared property.
Property that is acquired before or after a marriage is typically going to be classified as separate property. It is important to note that there may be exceptions to these guidelines based on state laws.
How Is Title Held During Marriage?
When spouses purchase property during a marriage, they are required to determine how they want to hold the title. The spouses can hold title as tenants in common.
Each of the tenants in common owns a specific interest in the property that does not have to be equal. Each of the tenants can distribute their share in their will to whomever they choose.
The most common way for spouses to hold title is as joint tenants with the right of survivorship. When the spouses hold title in this way, all of the co-owners have to take title at the same time.
All of the co-owners own equal shares and the co-owner who survives will wind up owning the entire property. In other words, after a joint tenant passes away, the survivor tenant or tenants will receive the share of the deceased.
In certain states, when spouses use this method, it is referred to as tenancy by the entirety. Spouses who acquire property in a community property state, such as California, Louisiana, or Texas, can take title as community property.
Each of the spouses will own half of the property that can be passed through the spouse’s will either to the surviving spouse or to another individual. Any property that is acquired during the marriage may be considered community property.
Married couples may also hold title in a revocable living trust.
Do Marital Property Laws Differ by State?
Yes, marital property laws differ by state. In general, states are classified into one of two categories depending on the types of marital property laws that they follow.
Certain states use community property law. Under these laws, shared property is to be split equally between the spouses in a 50/50 manner.
This can be calculated according to set rules or formulas. The separate property will belong to the acquiring spouse.
States that follow the community property laws include:
- New Mexico;
- Washington; and
In non-community property states, the courts will most likely follow an equitable distribution system. Under these laws, the couple’s property can be divided on a case-by-case manner, according to what the court deems to be equitable or fair.
This may be accomplished by examining various factors, including:
- How long the marriage arrangement lasted;
- Whether there are any specific property agreements between the spouses that might affect the property distribution, such as a prenuptial or postnuptial agreement;
- The financial background of each individual spouse;
- The overall character and disposition of each person’s estate; and
- Various other factors.
Therefore, property division in a divorce proceeding in a state that uses equitable distribution may not follow an exact 50/50 split or division of the couple’s property. This is typically considered acceptable, as a court will attempt to divide the property in the most fair manner through an examination of many different factors and contexts.
What Happens to Jointly Owned Property after Divorce?
When a couple divorces, it is essential to change joint ownership of property. In most cases, the spouses held title to their home as joint tenants with the right of survivorship.
Chances are, a spouse would not want their ex-spouse to retain full ownership of their home should they pass away first. These may also be problems with sharing property after divorce or co-owning a house after divorce.
If one of the ex-spouses acquires a negative judgment or an outstanding loan, it is possible that the only remaining asset that an individual’s ex-spouse has with any value is the co-ownership of the home. In that case, a creditor may place a lien on the individual’s home until their ex-spouse pays off their debt.
Creditors are permitted to place liens on homes to recover payment on a debt so long as the creditor obtains a judgment from a court first.
How Do You Sever Title?
Spouses who have an amicable divorce may come to an agreement during the proceedings so that one of the spouses retains ownership of the property and title is transferred to that spouse’s name. The ex-spouse would then receive compensation as a buy-out.
Typically, however, the majority of divorces do not end amicably. If an individual and their ex-spouse hold title as joint tenants, one of the parties can prepare a Notice of Severance.
Once this document is signed and sent to the ex-spouse, it has the effect of severing the joint tenancy and converting it into tenancy in common. With both a tenancy in common and a joint tenancy, the title may also be severed by a partition act.
A partition act is a specific type of lawsuit in which one of the co-owners asks the court to divide a piece of real estate equally between the owners or to sell the property. In order to begin the partition process, one of the parties must file a Notice for Partition.
Each of the co-owners receives a portion of the property.
What Are Some Other Issues to Consider?
The right of survivorship, in general, refers to the right of joint tenants to claim the entire property upon the death of another joint tenant. This right is only available in two situations:
- Joint tenancy; and
- Tenancy by the entirety, or joint possession by a married couple.
The right of survivorship is a powerful legal right that can override other types of legal claims, for example, inheritance claims. This right is currently recognized under statutes in every state.
If an individual’s ex-spouse’s financial troubles cause them to end up filing for bankruptcy, the other spouse may be left paying the entire mortgage on their own.
For some individuals, this financial burden will be too much and may lead to foreclosure of the home. Foreclosure can ruin an individual’s credit and make it impossible to buy a home in the future.
Should I Consult a Lawyer?
If you are facing a divorce and you are considering sharing title to your home after your divorce, it is important to consult with a divorce lawyer to determine if this is right for your situation. In addition, if you currently share title to a home with a former spouse and would like to change this, your attorney can help.