What Happens to the Assets in a Divorce?

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what happens to the assets in a divorce

How a couple’s assets are split up in a divorce depends largely on the state in which they live.  Currently, nine states consider marital assets “community property.” Those states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these so-called community property states, all property and assets of the married couple are considered the combined property of both people. Therefore, if one spouse earns all the money, the non-working spouse is considered to have an equal interest in the money.

Alabama law follows the majority of states in America by applying the principle of “equitable distribution.” This term often confuses people because they think it means everything is split “equally.” This is not the case. Instead, it just means that a court is given the authority to consider a wide range of factors in dividing property fairly. Of course, this does not mean the outcomes are always fair. Here are just a few common things people worry about when dividing assets in a divorce.

What is Mine is Mine: Keeping Things Separate

When two people petition an Alabama court for divorce, the court will separate property into two categories – marital property and non-marital property. These are exactly what they sound like. Marital property is something that you share with your spouse, so the court is going to have to decide whether and how to divide it. Non-marital property is something that does not get shared or have to be divided.

Examples of Non-Marital Property

  • Cash and property owned prior to marriage and kept separate
  • Inheritance that has been kept separate
  • Income earned from other non-marital property that is kept separate

Example of Marital Property

 

  • Regular income
  • Primary residence
  • Any non-marital property that is “commingled” with marital property

Inadvertently Converting Non-Marital Property into Marital Property

Depending on your circumstances, be careful when it comes to property that is generally non-marital. It can easily be converted into a shared marital property simply by commingling it. Consider this example:

Bob receives $100,000 from his father’s estate. If he immediately puts the money in a separate bank account in his name only, then the asset is generally regarded non-marital, meaning it is not subject to the court’s division at divorce. If, however, he mixes the money with marital property, it loses that protected classification. Here are a few things that would usually be considered commingling if Bob were to do them.

  • Use the inheritance to pay off mortgage on marital home
  • Make his spouse a joint account holder for the money
  • Have his paychecks deposited to same account as inheritance
  • Use money to consolidate marital debts (credit cards, car loans, etc.)

Getting the Right Advice from the Start

As you can probably tell, there are a lot of traps for the unwary. It is best to consult a local Birmingham divorce attorney before you file for divorce. Make sure you understand what you can and cannot do before you make potentially devastating choices that could cost you a lot of money and potentially have a severe impact on the outcome of your divorce. Five Points Law Group can answer those difficult questions and work to give you peace of mind when you need it most.

Heather Fann
Heather Fann
Heather's practice seeks to preserve the dignity of clients through healthy paths for their changing families, employing both modern and traditional means of resolution including collaborative practice and methods such as use of Parenting Coordinators, as well as mediation, though she stands ready to litigate where necessary.

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