Knowledge — 2 years ago

How Do Assets Divide in a Divorce?

by Alvin V.

How Do Assets Divide in a Divorce, Division of Assets in Divorce

Division of Assets in Divorce

Community Property

When a divorce happens, the assets owned by the couple would come up for division. The assets that the couple own are classified as community or non-community. Community property is that which is owned by both and acquired during the marriage as a result of the earnings during the marriage. It is not just assets even debts have to be shared. non-community property refers to separate property belonging to either spouse. This refers to assets a spouse has acquired before the marriage. Even during the marriage, if a spouse acquires an asset through his/her funds, it won’t be community property.

A business that has started prior to marriage will not be considered community property. The spouse who started it has full rights to it. However, if the business is started after marriage, then it would be community property and considered as an asset for the division. Certain property can be a combination of community funds and separate funds. If a spouse can prove that personal funds were used, it would belong to him/her, else it is considered community property.

How Do Assets Divide in a Divorce

Community vs. Equitable

In the USA, states like California, Idaho, Louisiana, Washington, Wisconsin, Texas, New Mexico, and Nevada uses the community method for division of assets. In these states, all assets are considered as community property by default. Hence, the division of assets would be in the ratio of 50:50. The spouse can, of course, contest this and try to prove that it is a personal asset. In all other states of the USA, the principle used for dividing assets after a divorce is equitable division.

Equitable division is the fair division method. Here, fairness and contribution of the spouse to create the asset are considered while deciding on the division. The earnings of each of the spouse during the marriage, age, health condition, and future earning potential are also considered before dividing assets under the equitable principle.

How to Divide Assets?

  • If both parties can’t agree on the division, then the courts would decide as per the laws of the state and an analysis of the situation. In all other cases, the spouses can together decide on dividing the assets. This is how it can be done:
  • a) House and real estate: If there were children, then the house would usually be with the person taking custody of the children. Else, selling the property and dividing the money is an option. Another option is for any party to transfer equity to the other spouse and take over the possession of the house.
Division of Assets in Divorce
  • b) A complete inventory of all assets needs to be made. This should start with the house and include everything that the couple has with them. Against each asset in the list, both parties should mutually agree if it is community property or personal property. If agreed as personal property, then it would belong to the person against whose name it is listed.
  • c) If the couple cannot agree on classifying the assets, then the help of a mediator can be used. If even this doesn’t work out, the matter has to be decided through litigation.
  • d) Vehicles can be in the custody of the person in whose name it is registered unless agreed otherwise.
  • e) There may be some sentimental items like photographs, wedding gifts, and other memorabilia. These usually have to be divided equally and fairly.
  • f) Household appliance, kitchen goods, and furniture also need to be divided. The person with the house may get to keep all these.
  • g) Retirement accounts also need to be divided. There are tax issues here and the advice of an accountant can be taken to divide these accounts.


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