How to divide property and debt is often a big issue to navigate in a divorce. After all, even if they're on friendly terms, spouses can have very different ideas as to what's fair. When divorcing spouses can't agree on property and debt division, they have to go to court, where a judge will apply the state's laws to craft a property division order. Many divorcing couples, though, are able to reach an agreement outside of court.
Regardless of how you'll resolve your divorce , understanding the basic legal rules can help you make informed decisions as you go through the process.
Depending on state law, courts normally use one of two approaches to divide marital property and debt: community property or equitable common law distribution. Division of property doesn't necessarily mean a physical division. Instead, the court might award each spouse a percentage of the total value of the property. Each spouse will get personal property, assets, and debts whose worth adds up to a fair percentage. It is illegal to hide assets in order to shield them from property division.
If you live in a community property state or have opted to treat some or all of your property as community property possible in only a few states , the general rule is that spouses equally own all property either one acquires during the marriage. However, there are exceptions to the general rule—some property is classified as separate property or commingled property.
The following general descriptions can help you classify your property. Separate property belongs to only one spouse. It can include property acquired before and during marriage. It includes:. Commingled separate property is made up of both separate and community property. When a spouse mixes separate property with community property during the marriage, the separate property can become partially or wholly community property.
For example, when one spouse puts separate property money into a checking account used by both spouses, the separate property funds likely become community property. On the other hand, a court might consider property purchased with a combination of separate and community funds as part community and part separate property, so long as a spouse can demonstrate that separate property funds were used to make the purchase. Which spouse remains in the family home depends on the circumstances.
Although judges will look to see who holds the title to the house , the name on the title doesn't determine who will stay in the family house. When allowing one spouse to remain in the family home is unfair to the other spouse or results in an uneven distribution of property, judges often will award the home to one spouse on the condition that the spouse pay the other to make up for the imbalance a "buy-out".
Couples can maintain control over how marital property and debts are divided by negotiating a settlement agreement. What sometimes makes this confusing is that division of property does not necessarily mean a physical division. A court may award each spouse a percentage of the total value of the property.
In that event, each spouse will get personal property, assets, and debts whose worth adds up to an assigned percentage. Note that it's illegal for either spouse to hide assets in order to shield them from property division, and if you do this, a court could punish you with sanctions and in some states, by awarding a percentage of the value of the hidden asset to your spouse.
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Section 25 of the Matrimonial Causes Act the Act sets out the basic guidelines that the English and Welsh Courts apply when dealing with financial claims involving property, savings, pensions and maintenance. In addition, the Court will also have reference to previously decided cases, known as case law, when making its decision. Where there are dependent children under the age of 18, this will have a large bearing on how the Court exercises its discretion in dividing matrimonial assets.
Section 25 of the Act, provides that it shall be the duty of the Court in deciding how to exercise its powers to have regard to all the circumstances of the case with the first consideration being given to the welfare and needs of the dependent children.
Section 25 of the Act sets out the issues that the Court is to consider in deciding how to exercise its powers. These are as follows:. In divorce, judicial separation or dissolution of a civil partnership, the Court has the power to make a variety of orders:. The Court can order one party to pay the other a lump sum or a series of lump sums. For example, the Court could order the husband to transfer to the wife his interest in the former matrimonial home in return for the wife paying to the husband a lump sum.
The Court can order the sale or transfer of all forms of property, although the most common is the former matrimonial home. The Court could order a property to be sold and how the net proceeds of the sale are to be divided. The Court can also order a property to be transferred from one party to another.
The Court has the power to order the division of pensions. For example, the husband could be ordered to transfer all or a percentage of his pension to his wife creating a new pension fund for her in retirement. This is known as a pension sharing order.
The Court can order one party to pay the other maintenance. If the level of child maintenance cannot be agreed then this is dealt with by an application to the Child Maintenance Service. The Court has only limited powers to make orders in respect of child maintenance. Every marriage is different and every divorce settlement is different. There are no rigid rules dealing with the division of assets on divorce and the law has to be flexible to apply to each individual case.
The Court has a wide discretion. Since no rigid rules apply, the Court will take into account the following broad factors when considering the division of the matrimonial assets:. Where there are dependent children, this will be the first consideration when deciding how the matrimonial assets should be divided in a divorce.
In practical terms, this means providing a home for the children. However, this does not mean that the needs of the other parent will be overlooked or ignored. The outcome will seek to balance the financial needs that both parties have housing, food, clothing, holidays, etc.
Before the Court can deal with the division of the capital assets, the full extent of those assets has to be disclosed and identified. Disclosure normally takes place in Court proceedings by a way of exchanging Financial Statements Form E.
The former matrimonial home, any business or pension assets will need to be valued. The Court will not only look at the current income position of the parties but their future earning capacity, which may change following the divorce. For example, the parties may be expected to increase their working hours or have to reduce them to accommodate child care.
This will include the re-housing needs of the parties. Both parties will need to provide a roof over their heads. Once again this will be a particularly important need for the carer of any dependent children. When the Court looks at the length of the marriage it will usually include pre-marriage cohabitation.
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