How Will Our Assets and Debts Be Divided in a Divorce?

In a divorce, everything you and your spouse own and owe has to be divided, either by an agreement the two of you reach or by a judge. How assets and debts are divided in a divorce depends on the state where you file, but most states follow the same basic path: sort what you have into marital and separate property, then divide the marital assets and debts under that state’s standard. Whose name is on an account or deed rarely decides the answer, and a divorce decree, the court’s final order, does not change what the lender can collect when it assigns a debt to one spouse.

What Does Dividing Assets and Debts Mean in a Divorce?

Assets are anything of value, such as the home, cars, bank and investment accounts, retirement savings, a business, and household belongings. Debts include the mortgage, car loans, credit cards, and other balances. Both lists have to be accounted for, and the process generally moves in this order:

• List everything: Each spouse discloses what they own and owe, usually with statements and records.
• Put values on it: Major assets such as the home, a business, or a pension are valued, sometimes with help from an appraiser.
• Sort it: Each item is classified as marital or separate property under the state’s rules.
• Divide it: The spouses agree on a division in a settlement the court reviews, or a judge decides it.

What Counts as Marital Property?

Marital property is generally what either spouse acquired during the marriage. Many states presume that property acquired during the marriage is marital whether it is titled in one name or both, so a paycheck saved, a home bought, or retirement contributions made during the marriage usually start out in the marital column.

Separate property generally includes what a spouse owned before the marriage and gifts or inheritances received during it, though the details differ by state, and separate funds mixed into joint accounts can lose their separate character. Tracing, the work of showing where an asset came from, can decide the marital vs. separate property question.

How Do States Start the Division?

States follow one of three broad approaches, and the approach decides what goes into the division and where the court begins:

In states that divide everything, where an asset came from can still affect each spouse’s share. Because the starting points differ this much, a rule from a friend’s divorce in another state can be wrong for yours.

Why Equal Is Only a Starting Point

Even in states that begin with an equal split, the final division can differ when equal would not be fair. The factors courts commonly weigh include each spouse’s contribution to acquiring the property, including work as a homemaker, each spouse’s earning ability and economic circumstances, and the length of the marriage. Some states also allow the court to consider awarding the family home, or the right to live there, to the parent with custody of the children.

Those factors are written in neutral terms. None of them assumes which spouse earned more, saved more, or ran the household; the record each spouse builds is what puts those facts before the court.

Who Is Responsible for the Debts After a Divorce?

Debts taken on during the marriage are generally divided along with the assets, and some states measure the property being divided by its net value, meaning after the debts against it.

The decree controls the spouses, not the lenders. As the Consumer Financial Protection Bureau explains, divorce does not automatically change either spouse’s relationship with creditors, so a lender can still pursue anyone whose name is on a joint account even if the decree assigns that debt to the other spouse. A release from the lender or a refinance that removes one spouse’s name is what ends that exposure, which is why the terms for dividing debts in divorce can include deadlines to refinance or close joint accounts.

What Happens to the House and the Retirement Accounts?

The house and retirement savings can be the largest assets, and courts have several ways to divide them:

• Splitting the asset itself between the spouses
• Awarding the asset to one spouse and requiring a fair payment to the other
• Ordering a sale and dividing the proceeds
• Ordering retirement or pension benefits split by court order

Keeping the house can mean buying out the other spouse’s share and, when the mortgage is joint, refinancing it.

Retirement benefits earned during the marriage are generally part of the division, whatever name is on the statement. Employer plans such as a 401(k) or pension are typically divided by a court order called a qualified domestic relations order (QDRO), while an IRA is usually divided by a transfer made under the divorce decree. The method matters because the wrong one can create taxes or penalties.

Can Hidden Assets or Misconduct Change the Division?

Many states divide property without regard to marital misconduct, so an affair alone does not move the line. Financial misconduct is different. When one spouse hides, wastes, or quietly transfers marital assets, courts in many states can account for it, for example by awarding the other spouse a larger share of what remains. Gaps in either spouse’s financial disclosure are where a spouse hiding assets or income tends to come to light, through account statements, tax returns, and business records.

Get Answers About How Your Assets and Debts Will Be Divided in a Divorce

You do not need every number in hand to start, but knowing what exists, what it is worth, and whose name is on it puts you in a stronger position. WSM Law represents only women, with a strategy designed around your goals and straight answers about how your assets and debts will be divided in a divorce in your state. Call (380) 203-2023 or contact us today to schedule a free consultation.

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