A divorce beckons the unavoidable division of marital property. Not only is it an emotional ride to divvy up your union’s accumulated wealth; in addition, it is a critical moment to plan and initiate your future well-being. Cars, boats, real estate, family heirlooms, stock portfolio, savings, retirement, any business interests, and more, can all be pieces of a divorce settlement.
Dividing property can be a pain point, whether your list of assets is short or long. Greater numbers of assets beget a more complex division of property. Yet, the ultimate cost of setting up two separate households may be less egregious when financial resources abound.
Look to Jeff and Mackenzie Bezos’ split as a public couple who have maintained decorum, in spite of their $137 billion net worth. On the opposite end of the spectrum, billionaires Frank and Jamie McCourt duked it out in a courtroom battle. In hindsight, Jamie McCourt said, "...I could not have been more ignorant or naive about my own financial situation, and I ended up paying dearly for that mistake.”
To set up a best-case scenario and protect your interests, arm yourself with knowledge and talk to an experienced family law and divorce attorney before moving forward.
Separate property or marital property?
To start the process, take inventory of what you own versus what you and your spouse own together. Make a list and put a value on all assets.
- Marital Property is anything acquired during the marriage, regardless of the name on the deed. Personal gifts or inheritance are the exceptions.
- Separate Property is items you brought into the marriage, inherited during the marriage, or gifts received during the marriage.
- Marital property is divided upon dissolution of marriage. However, courts may factor separate property into the equation on a case-by-case basis.
- Do not conceal assets. Legal consequences will negatively affect your situation if you hide money offshore, for example.
Property division systems are Community Property and Equitable Distribution, depending on your state’s laws.
- Community Property states divide assets equally in a divorce. In these states, what is acquired during a marriage, by either spouse, is owned equally by both spouses; regardless of who purchased it, who earned income, who stayed home to raise children, whose name is on (or off) the deed. Spouses retain their separate property. Community Property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Puerto Rico. In Alaska, South Dakota, and Tennessee, residents can opt into a system similar to community property.
- Equitable Distribution applies to the remainder of the states. Equitable distribution is a “fair” distribution of marital assets. Fair does not mean an “equal” distribution, however. The courts examine the future earning potential of each spouse, post-divorce, to make a decision on how to fairly divide existing marital property.
Will a judge decide my fate?
Not necessarily. According to Kristen A. Algert, a family law attorney with GoransonBain Ausley in Austin, Texas, property division by a judge is the less common outcome.
“Ninety-five percent of all divorce cases settle,” Algert says. “Very few divorces go to trial and allow a judge to divide their property. Clients can always preempt court by reaching an agreement on their own, in mediation, per the Collaborative Divorce process, or having their litigation lawyers negotiate.”
Consider contention with your spouse an expense you want to moderate—or avoid. Compromising will cut costs. Time is money, and attorneys negotiating ownership of a $600 table at $400 an hour can quickly result in a bill exceeding the value of the marble dining room table.
Having more say with a pre- or postnuptial agreement
While prenuptial agreements are more common, another option is a postnuptial agreement. In either case, the married couple spells out division of assets in their own terms before or during a civil union. If a split occurs, there is an existing level of preparedness and potentially less court intervention, and a lower overall cost to the divorce.
Assembling a team of professionals
Dividing property is a business decision. Of course, emotional upheaval obscures clear thinking, which is why professional advice is imperative.
Beth Maultsby, a family law attorney with GoransonBain Ausley in Dallas, Texas, says, “It is in the best interest of a party to a divorce to be represented by an attorney, even if the divorce is not contested and the parties believe that they will have an agreement. Legal representation ensures that (1) the individual understands his/her rights under the applicable marital laws; (2) all of the necessary terms related to... property issues are addressed; and (3) the appropriate divorce documents are prepared and are enforceable.”
Whether your situation recalls Bezos, McCourt, or falls somewhere in the middle, professional advice mitigates confusion and ensures both spouses receive a just property settlement.