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Property Division in Equitable Distribution States, P.1

Property division is an important aspect of the divorce process that, along with child custody, is often a major point of contention among divorcing couples. Going into a divorce, it is important to have an understanding of how property division works in your state and what types of negotiation strategies could be pursued in order that you get the best outcome.

States are divided between two different approaches to¬†property division. Texas uses an approach called equitable distribution, in which marital assets–all assets acquired during the marriage, with some exceptions–are divided according to the financial situation of each spouse, with an eye to parity. Community property states, by contrast, work on the presumption that marital property is jointly owned, and so gets split in half.

In states that use the equitable distribution approach, separate property can lose its status as separate if it is commingled with marital property. This is important to understand not only in divorce but also in drafting pre-marital agreements, before couples team up financially.

In actually dividing assets, divorce courts using the equitable distribution approach will consider several factors, including the length of the marriage; each party’s income; the standard of living; each party’s earning potential; and the financial needs of the custodial parent.

Dividing assets by their current dollar value are not all there is to it. It is important to discern between assets that will be most valuable for short-term and long-term financial security. Sorting this out requires looking at assets’ liquidity, cost basis, and potential tax costs when the asset is sold later on.

Of course, it is not only assets that are divided in a divorce, but also debts. In our next post, we’ll take a look at dividing debts.

Source:¬†Huffington Post, “Your Finances and Divorce,” Karen Stewart, June 19, 2013.

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