Details on State Marital Property Laws
Almost everything acquired by a married couple during the course of a marriage (including debt) is called "marital property," even though the term is only relevant when the couple gets divorced. Nearly all property obtained by either party after the date of the marriage is considered marital property and subject to division upon divorce, while anything acquired prior to the marriage is called "separate property." Some states split property down the middle in accordance with "community property" laws, but most states take a more nuanced approach that considers the means and needs of each party.
Does Your State Recognize Community Property?
If you live in a community property state, virtually all property acquired during the marriage is jointly owned by both spouses and thus may be divided equally upon divorce or death. This is not to say that each item is literally split in two (who wants half a car?). Rather, each party receives an equally valued share of the marital property. Community property, rooted in Spanish law, was meant to acknowledge the equal contributions of both parties in a marriage.
Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska gives couples the option of entering into a community property agreement.
California law, for example, requires the net value of the items going to each party to be the same. So while one party may get the house, the other party may get the family business. But this division can get really complicated when, for instance, one party has made considerable contributions to a family business solely owed by the other party before the marriage.
Most state laws on marital property are based on the concept of "equitable distribution," which takes the needs of each party into account. For instance, the contributions of a homemaker who didn't receive a paycheck but nevertheless managed the household will be taken into account. In many cases, a lifelong homemaker will not have many job prospects and may need more of the shared assets.
The exact process by which courts reach a decision varies from state to state, but they typically consider the following factors:
- Earning power of each spouse
- Which party earned which property
- How long the marriage lasted
- Each party's non-monetary contributions to the marriage
- Any special needs, such as lifelong medical care or assistance
Illinois law, for example, specifically states that the fault of either party is not a factor in equitable division. In addition to the factors listed above, Illinois courts also consider the tax consequences of the property division on each spouse and any obligations arising from any prior marriages.
Property that is not subject to division is called separate property, which is fairly standard from state to state. Separate property includes:
- Property acquired prior to marriage
- Personal gifts
- Inherited funds
- Pension proceeds
- Property acquired with separate property
Divorce is a complicated and emotionally taxing process. Make sure you meet with a divorce attorney in your state before entering into a property distribution agreement.
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