It is likely that during your relationship, you or your spouse acquired assets, such as a home, a car, or furniture. You may have also acquired debts, such as a mortgage, credit card debt or a bank loan. You may have joint bank accounts and loans may be intermingled. Property division is the legal terms that describes how you and your former spouse decide to separate what you own and what you owe.
You are going to need to come to an agreement on how to separate the assets and debts. Earlier in this chapter, you started to complete the Financial Inventory Worksheet. To separate your property, you will need to have completed that worksheet.
Legally speaking, the common practice is for everything you acquired during your relationship – what you own and what you owe – to be split 50-50. This type of property is called family property.
The things you owned before the relationship you get to keep, except if there was an increase in its value which is split 50-50. This property that is not family property is called excluded property. In that case, the increase will be divided evenly between you and your spouse. For example if you owned a house before your marriage and the value increased by $30,000 while you were together, you would both be entitled to $15,000. The house is a type of excluded property, because you owned it before the relationship. Other excluded property includes inheritance, certain court awards, property held in trust and some insurance payments.
Debt is treated similar to property. Debt incurred during the relationship is divided 50-50 while debt from before is the responsibility of the spouse that incurred it.
The 50-50 principle is applied by the court if you and your spouse are not able to agree on how property should be split. Between the two of you, you can decide to divide property any way you choose. So for example, one spouse may get the house and all of the furniture, while the other gets both cars. This is perfectly legal.
It is your agreement and as long as you are making an informed decision, you can divide the property as you wish. Each couple decides how they want to separate their property.
To learn about property that may not be divided evenly, see Chapter 6.
We discussed the financial changes that you will need to face earlier this chapter. Here’s a recap on what you will need to do to deal with those changes. By having a good grasp on your own financials you will be more able to deal with divided your property.
Assets and debt acquired during your relationship will be split 50-50.
You get to keep the things you owned before, except if there was an increase in its value. The increase will be divided 50-50.
You will need to make some decisions about how to divide up your things.
There may be some tax consequences in the selling of property.
Consult a financial advisor or an accountant for advice on how to manage your property division.
What will happen to the family home? Will you sell it or will one of you continue to live there and buy out the other’s share in the house?