In every divorce, couples must divide marital property and debt before the judge will grant the request for a divorce. Couples have two choices: work together to determine what property each spouse will take away from the relationship, or ask the court to decide for you. If you live in a community property state, the court presumes that any assets (or debts) accrued during the marriage belong equally (50/50) to both spouses. If you have property that belongs to you, whether you brought it with you to the marriage, or you acquired it alone during your relationship, you’ll need to ask the court to award the separate property to you.
In equitable distribution states, the court will divide marital property fairly between the spouses, which doesn’t always mean a 50/50 split. The court will categorize the property as marital or separate before the judge awards any portion to either spouse. If you have separate property, you’ll need to prove your ownership with receipts, witnesses, or any other evidence. There’s no doubt that a judge won’t understand your family’s circumstances as well as you do. If you’d like to keep control of how you split your assets and debts in your divorce, it’s best to work with your spouse, rather than letting a court decide.
Before You Get Divorced – Create a List of Assets for Division
One of the easiest ways to start the property division process is for each spouse to create a list of assets and identify which spouse should receive it in the divorce. When you’re both finished with your list, you can come together to compare. If you have a dispute, work together to resolve it and determine who should get the property. It’s important to be transparent through the property division process. Both spouses must identify all assets that they acquired throughout the marriage, which includes bank accounts, insurance policies, vehicles, retirement accounts, pensions, real estate, recreational vehicles and equipment, and anything else that holds value. If you agree to a property settlement and later find out that your spouse didn’t disclose an asset, you can ask the judge to reopen your case to reevaluate the property division. In addition to potentially losing assets later, the guilty spouse may also face fines or penalties from the court if the judge believes your ex intentionally failed to disclose or hid information the asset. Honesty is always the best policy when it comes to disclosure.
Figure Out The Real Value Your Property
Another important step is to determine what the property is worth. Generally speaking, courts will accept the fair market value (FMV) of each item, which is what you can get for the item if you sell it on the open market today, not what you paid for it. Try to agree on a value for each asset worth more than a specific amount say, $100 or $500. There are some useful websites that can help you value certain property, such as Zillow.com or Redfin.com for real property. For more difficult or complex valuations, like of a business or antique collectibles, you may need to hire an appraiser. If you can’t agree on a value for a specific item, you may each have to hire independent appraisers, and ask a judge to pick from one of the two valuations.
Determine If the Property Is Marital or Separate
Whether you’re in a community property or equitable distribution state, if you own separate property, it will remain in your possession. That said, you must first categorize and agree that the assets were separate before you can move forward. Each spouse should identify the owner of each asset. If there is a disagreement about whether an asset is marital or separate, the person claiming the item will have to prove to a judge that it’s owned separately. You can do this by showing the date of purchase, where the funds came from to purchase the item, and how the item was kept separate during the marriage.
Don’t Forget About Your Debt
Marital debt is not excluded from property division in a divorce. If you acquired joint debt during your marriage, like a mortgage, car payment, or tax debt, you will probably have to split that between the two of you during your divorce. If you owned a credit card in only your name, and you never used it for marital purposes, like groceries, you may be solely responsible for the amount owing. Remember, while the court can assign the debt to either (or both) spouse, it can’t change the contract you have with your creditors. For example, if the judge requires your spouse to pay off a joint credit card, but your ex fails to pay the monthly payment to the creditor, the credit card company can (and will) still come after you for payment. Unless you want your credit score to be in jeopardy, you’ll need to pay it, and ask the court for reimbursement from your spouse later.
Draft a Settlement Agreement
If you and your spouse can agree on all of the terms of your property and debt division, you can create a property settlement agreement to present to the judge. Your agreement should list each asset and debt, the owner, and the value. If you want to be sure that you’re not making a bad deal, you should ask an experienced attorney to review the agreement before you sign it. In most cases, the judge will honor your agreement. However, if a party without a lawyer agrees to a property settlement that awards more than half of the property to the other spouse, the judge may want to investigate before approving it. No court wants to see a spouse walk away with an unfair distribution of property.
Date Property Purchased and Use During Marriage
The biggest part of the analysis for what happens to real estate after a divorce is when the property was purchased. If one of the parties purchased the property before the marriage, it might be considered a pre-marital asset that belongs exclusively to that spouse. However, if the property served as the home in which the couple lived while married, or as a source of marital income, the property may have converted to a marital asset subject to equitable distribution between both spouses. In most states, it is possible to own property before a marriage and still retain exclusive ownership of that property. This is true even in the absence of an ante nuptial (or “prenuptial”) agreement. The trick is that the property must remain exclusively a benefit of the owner spouse. If that spouse begins sharing the use and enjoyment of the property (or proceeds derived from the property, such as depositing them in a joint bank account), the solitary ownership interest may dissolve. Property purchased after a marriage, or which is used for marital purposes (like serving as the house in which the couple lived) is generally an asset of both partners and the interest in the property must split in a fair manner (i.e., “equitably”) between the parties.
How to Deal With a House without a Fight
If the two parties to a divorce are still civil and want a clean, quick, and simple break, selling a property is a great idea. The only issue will be how the proceeds are divided between the spouses and, unfortunately, this issue alone can become quite contentious. If the parties can agree beforehand, they may avoid considerable headaches when the property sells. Alternatively, having the attorneys negotiate or hiring a mediator may be other ways to determine an appropriate distribution of the cash from the sale. If all else fails, the judge presiding over the case will make a determination based on fact and law, but that removes the parties’ ability to come to a better arrangement between themselves and could end up leaving both parties unhappy with the outcome.
What Happens if Both Parties Want the House?
When former spouses want to keep a property, whether out of financial need or spite, things can get much trickier. If the other party is willing to walk away from ownership, the one who stays can simply “buy out” the other’s interest in the property. This also requires the departing spouse to be removed from any deeds, mortgages, or other rights or obligations on the property. On the other hand, if both parties want to retain possession of the property, the matter must be decided by a judge. Often, the ownership will be granted to one party at the cost of certain other assets that party may have wished to retain. That way, neither party gets more out of the divorce than the other. However, this also means sacrificing other things which the spouse that keeps the property might have wished to retain. Thus, it is usually best, even under contentious circumstances, to attempt to resolve disputes over property ownership amicably rather than by going through court.
Documents Related to Income
These are key to the process because the court needs to understand your financial positions and employment status to be able to consider child support, alimony, and property division. These documents generally include income tax returns and pay stubs. If you have a side hustle that brings in additional income (even through commission or tips), you’ll need to have these documented as well.
• Your paycheck stubs from all sources of employment over the last year. If you are self-employed, provide income tax returns and any tax forms or business forms related to self-reported income. This should include documentation from any business you or your spouse held an interest in over the past three years.
• Your spouse’s paycheck stubs for the same period of time. Those check stubs will often show year-to-date earnings and deductions.
• Documentation regarding business expenses if either you or your spouse is self-employed. These may include check registers, bank statements, canceled checks, payment receipts, financial statements, and profit and loss statements.
• At a minimum, copies of your joint or individual tax returns, both state and federal, for the past three to five years.
• If you or your spouse work for cash, copies of check ledgers that will show any expenses paid during the marriage.
• A copy of any financial statements or statements of net worth prepared by you or your spouse for the purpose of securing bank loans or for any other purpose.
• Any other information that will establish your net worth, your spouse’s net worth, your joint net worth, your income, and your spouse’s income.
Documents Related to Real Estate
Real estate is a major asset that will need to be taken into consideration. Any real estate purchased during the marriage is marital property and will be divided in the divorce. Real estate owned separately (bought before marriage) could also come into play if marital funds were used to pay the mortgage or do upkeep or repairs on the property.
• Any documents showing the legal description of any real estate owned together or separately. These can be obtained from your mortgage company or bank.
• Your current mortgage statements on any mortgages you have on real estate property.
• All documents pertaining to the initial purchase of the real estate.
• If the real estate has been refinanced, all documents pertaining to the refinance.
• Tax assessor’s statement(s) pertaining to any and all real estate.
Documents Related to Joint Financial Accounts
Similar to income statements, the court needs documentation of all financial accounts, both separate and joint. Both parties have to completely disclose their assets. Any account opened or contributed to during the marriage is potentially marital property and must be assessed.
• Savings passbooks and savings certificates of individual or joint accounts held individually or jointly by you and your spouse.
• Any and all bank statements for the past three years from any account in your name or held jointly with your spouse.
• Statements from investment accounts you two hold jointly and separately.
Documents Related to Life Insurance
Life insurance can also be considered a marital property. In some cases, it can be viewed as a form of spousal support. Life insurance cash value could be divided in the divorce or the court can order a beneficiary change, such as to provide backup for child support. Statements regarding life insurance policies on your life, your spouse’s life, or on your children, whether it is an individual policy or a policy through your employer. This includes any documents indicating a cash balance or loans against the policies.
Documents Related to Marital Debts
Similar to the presentation of financial assets, any accumulation of debt will also need to be documented. All debts entered into during the marriage must be disclosed as part of financial disclosure. The court will determine which are marital debts and divide them as part of the divorce. An itemized list of any outstanding, unsecured debts including credit cards, medical bills, and any other loans in your name or your spouse’s name.
Documents Related to Pension Funds
All retirement assets must be disclosed and the court will determine how they are divided as part of the property settlement. Contributions made toward retirement assets during the marriage are considered marital property. Any subsequent benefits or interest could be considered a spousal benefit, for example a copy of recent statements for pension funds, retirement funds, 401(k) plans, mutual funds, or IRAs.
Free Initial Consultation with Divorce Lawyer
When you need legal help dividing assets in a Utah divorce case, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506