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Question

How do you divide assets in a divorce?

Answer

Generally speaking, there are two legal methods to determine how assets (and debts) are divided.

  1. Community Property: In community property states, assets acquired during marriage are assumed to be equally owned, and are thus divided 50/50 during a divorce. Current community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.In the U.S., the states where community property is optional include:
    • Alaska: Allows couples to opt into community property through a legal agreement.
    • Florida: Couples can opt into community property through a community property trust.
    • Kentucky: Couples can establish community property trusts.
    • South Dakota: Couples can opt into community property through a community property trust.
    • Tennessee: Couples can opt into community property through a community property trust.
  2. Equitable Distribution: In equitable distribution states, assets acquired during marriage to the spouse who bought them. When a marriage ends in an equitable distribution state, property is divided to reflect each spouse’s contributions and needs. A judge is typically required to ascertain factors like health, job/earning potential, and financial needs in deciding how assets and debts are to be equitably distributed.

Note: A prenuptial agreement (or a “prenup,” as they’re commonly referred to) enabled couples to superseded community property laws. If you have a prenup in place, you’ve already determined who is entitled to which property in case of divorce.

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