Tag Archives: Marital Property

Creative Ways of Handling Marital Property

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When parties are unable to reach their own decisions regarding how to divide their property, many courts often split the property evenly without regard to whether this split makes the most sense for the parties.  Through mediation, the mediator may suggest creative ways of determining how to divide marital property including:

Consider the Value to Life

Rather than focusing only on the monetary aspect of property, a mediator may suggest dividing property in a manner that takes into account the value that the property will add to each person’s life.  For example, if the couple has a marital home and a vacation home of very different values, the mediator may suggest giving each person one of the properties because each can provide a suitable residence to each spouse.  The same may be completed with vehicles and with recreational items. 

Adjust Spousal Support

Many courts do not use a specific formula to determine how much spousal support to award and instead look at a number of factors in determining this issue.  However, spouses are often better equipped to realize how much additional support will be necessary for the lower-earning spouse to maintain the same lifestyle.  The spouses can also consider trading off assets so that the spousal support obligation is reduced.  For example, if the couple owns additional residences that can be used as rental income, this amount of rental income can be deducted from the spousal support amount. 

Prolong Division

In some cases, it may not serve the parties’ best interests to liquidate assets immediately and divide them.  For example, the real estate market may be lagging behind and the parties may prefer to hold onto the property until there is new demand in the market.  Tax consequences may make it detrimental to liquidate stocks or retirement funds, so the parties may agree to an equalization later in time. 

Marital Property 101

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Marital property is defined under state law.  The principles of which spouse owns which property are primarily determined by whether the spouses live in a common law property or a community property state.

Common Law Property State

The vast majority of states follow common law property principles.  These states presume that property earned or acquired during the marriage is marital property.  There are several exceptions.  For example, if the parties enter into a valid prenuptial or postnuptial agreement, this default rule does not apply.  Additionally, property owned before the marriage, received as a gift or inheritance, personal injury awards, property acquired by one spouse by using only separate property with the intent to keep it separate and property acquired during the marriage by one spouse that is deeded in only one name and not used for the benefit of the marriage are usually considered separate property.   Upon divorce, the court can consider a number of factors to determine how to equitably, but not necessarily evenly, divide the marital property.

Community Property States

The remainder of states uses the community property system.  This system is based on the idea that all assets acquired or earned during the marriage are community property to which each spouse owns 50/50.  Marital property in these states includes income, property bought with the earnings of the marriage and debts incurred during the marriage.  Property acquired prior to the marriage is considered separate property.  Gifts or inheritances to one spouse are usually considered separate property.

Personal injury awards provided to a spouse in a community property state are usually considered community property, but they are considered separate property during the divorce.  Courts usually divide the property 50/50 in the event of divorce.  There are exceptions to this general rule, such as if one spouse misappropriated community property.