Community Property vs. Equitable Distribution

There are two main systems for dividing marital property: equitable distribution and community property. While the majority of states use equitable distribution, the community property states are larger and thus about a third of the U.S. population lives under these states, including California and Texas. Community property states split marital property evenly, while equitable distribution states will give the higher earning spouse a larger share than the lower earning spouse, such as a stay-at-home parent. Check out the Property and Debt Division FAQs and the Community Property Overview articles for more.

Debt and Marital Property

Debts from the marriage have to be divided among the spouses as well. Sometimes, debts may be associated with only one partner, such as gambling debts. In this case, the court can divide the debts appropriately to the wrongdoer. Typically, household or general expenses debts will be divided evenly. Even some seemingly separate debts, like student loans to one spouse whose career benefited the marriage, may be divided evenly to each spouse, depending on the state. Read the Credit and Divorce article for more information.

Taxes, Retirement Funds, Inheritances, and Divorce

You’ll want to understand how taxes are affected by your divorce, particularly in the year that you divorce. In addition, your retirement funds and other estate planning tools may need to be divided to compensate the spouse without an IRA. You may need a special court order called a “QDRO.” To learn more, read the Divorce, Taxes, and your Estate Plan article.

Inheritances are generally considered separate property and are therefore exempt from the division of property between spouses, see Inheritance and Divorce below.

Property Settlement Agreements

Property settlement agreements can be amicably entered into between former spouses to avoid drawn out court proceedings in a divorce. The judge will review it for equity, but as long as it’s fair enough, it’s typically granted. If both you and your ex can agree to a particular division of property, then it may be in your interest to settle your marital property issues outside of court. The sample property settlement agreement here is a great place to start.

Getting Legal Help

Because your marital property will be divided in accordance with your state laws if you divorce, you should consider entering into a prenuptial agreement with your spouse before marrying, especially if either of you expect to earn a significant income. If you’re getting divorced, you may want to speak with a divorce attorney about your marital property options, including drafting your own settlement agreement with your ex. This section includes a checklist to go over before discussing marital property, child custody, and spousal support issues with your lawyer.