Very generally, here are the rules for determining what's community property
and what isn't:
Community property includes all earnings during marriage and everything
acquired with those earnings. All debts incurred during marriage, unless the
creditor was specifically looking to the separate property of one spouse for
payment, are community property debts.
Separate property of one spouse includes gifts and inheritances given just
to that spouse, personal injury awards received by that spouse, and the
proceeds of a pension that vested before marriage. Property purchased with
the separate funds of a spouse remain that spouse's separate property. A
business owned by one spouse before the marriage remains his or her separate
property during the marriage, although a portion of it may be considered
community property if the business increased in value during the marriage or
both spouses worked at it.
Property purchased with a combination of separate and community funds is
part community and part separate property, so long as a spouse is able to
show that some separate funds were used. Separate property mixed together
with community property generally becomes community property.
Once the approach your state takes to property division is determined, there
are four issues that must be addressed.
Allocation of assets
- You must identify all assets owned by you and your spouse.
- You need to classify these assets as marital or nonmarital. In so
doing, you must determine if the marital or nonmarital estate should be
reimbursed for any efforts of a spouse or contributions made in acquisition
of the asset.
- The value of the assets must be determined.
- You must establish a possible plan for the division of the assets
in accordance with the laws of your state.
Overall, most states consider separately the division of the assets and
liabilities from the grounds for the divorce. Therefore, the court is not
attempting to punish your spouse for inappropriate marital behavior when it
rules on assets. At the same time, several states consider economic
misconduct in distributing assets. This economic misconduct is often known
as dissipation of assets (such as running up bills, reckless expenses,
maxing out the credit cards, etc.). The spouse who misappropriated or
dissipated funds will be penalized for so doing in the final divorce decree.
Finally, if you and your spouse entered into a prenuptial agreement, also
known as an antenuptial agreement, this agreement may control the
distribution of some or all of your assets upon the dissolution of your
marriage. This agreement may also address the issue of maintenance/spousal
support and control most of the issues in your case. If you entered into
such an agreement, you must review the agreement as soon as possible. You
may also want to discuss the effect of the written agreement with your
You and your spouse are still financially connected, and with this
connection comes certain risks. Credit-card companies will hold both of you
personally responsible for joint credit-card debt. If one of you decides to
go on a spending spree or fails to make timely payments on any debts, the
financial consequences to the other party can be disastrous. The best way to
deal with this problem is not to unilaterally close or freeze all of your
joint accounts but to try to work with each other to minimize the risks.
We have been married for many years. We're getting divorced and I'm
wondering about our joint finances. When should we separate our joint bank
and credit card finances? If one of us runs up large balances on the joint
credit card, would both of us be responsible for paying them?
Here are some suggestions:
- First, make sure that each of you has a complete set of financial documents.
- Second, It would probably be best to close any joint credit-card accounts.
However, if you have not already established credit in your name, you should
do so before the existing accounts are closed. In the interim, a formal
written agreement between you and your spouse on the short-term use of these
accounts or other potential sources of marital debt (such as equity lines of
credit) would be helpful.
- Open individual bank accounts and separate whatever cash can be reasonably
and quickly agreed upon.
- Investment assets that can not easily be separated should be frozen by
calling and writing to the respective financial institutions.
- If there's a need to maintain a joint checking account, formalize in writing
the purposes of the account and require both signatures on any future
- Any existing ATM cards should be destroyed.
- To further reduce individual exposure, the titles on any large accounts,
including the marital residence, should be changed to "tenants in common."
- Finally, joint safe-deposit box(es) should be jointly inventoried and frozen
Although joint handling of the above matters can increase the likelihood
that your assets will remain intact, it isn't without risk. It you have
doubts that the two of you will be able to work together honestly and
amicably, you should seriously consider immediate action to separate your
finances. This will probably increase hostility, but the long-term benefits
may outweigh the costs.
If children are involved, the parent who provides their primary care usually
remains in the marital home with them. If you don't have children and the
house is the separate property of just one spouse, that spouse has the legal
right to ask the other to leave. If, however, you don't have children and
you own the house together, this question gets tricky. Neither of you has a
legal right to kick the other out. You can request that the other person
leave, but he or she doesn't have to. If your spouse changes the locks, or
somehow prevents you from entering the home, you can call the police. The
police will probably direct your spouse to open the door. When you both own
the home, the only time you can get your spouse to leave is if domestic
violence has been committed and a judge grants a restraining order.
Who gets to live in the house during the divorce?
Alimony (spousal support or maintenance) is a court ordered allowance that
one spouse pays to another spouse for maintenance and support while they are
separated, while they are involved in a matrimonial lawsuit or after they
Historically, alimony was the law's way of enforcing a husband's duty to
support and provide for his wife. Today's society recognizes the presence of
both men and women in the workforce. Therefore, temporary alimony may be
awarded to either spouse.
A spouse who wants alimony must make a claim before the court issues the
divorce decree. Unless there was an act of fraud or a genuine mistake at the
time the divorce was ordered, a spouse will not be allowed to assert a later
claim for alimony.
The factors considered differ from state to state. Some states apply a
balancing test--weighing the needs of the recipient spouse against the
paying spouse's capacity to pay. Other states make an effort to award
alimony in a way that allows each spouse to continue to live in the
lifestyle to which he or she has become accustomed.
Factors considered in alimony
Some common considerations in the allocation of alimony are:
- Length of the marriage,
- A spouse's inability to work outside the home,
- A spouse's dependence on the state for support,
- Lessening the financial impact of divorce,
- Compensation for contributions to a spouse's education,
- Marital fault,
- A spouse's ability to support himself or herself, and
- An evaluation of a spouse's property and assets.
In many states alimony will terminate or be reduced if the spouse receiving
Alimony awards also can be modified to suit a change in a spouse's
circumstances. For example, if the spouse paying alimony is financially
unable to make the maintenance payments due to circumstances beyond his or
her control (ie, downsized from job), he or she may ask the court to modify
or end the alimony award. In most states, however, past due alimony
installments cannot be modified.
Modification or termination of alimony
Unless specified otherwise, alimony awards will end when either party dies.
If the spouses intend that the care of a spouse will continue after the
paying spouse dies, they should draft language to that effect into the
Lump Sum Support
In several states, a spouse may pay his or her total alimony obligation at
the time of the divorce by giving the other spouse a lump sum payment equal
to the total amount of future monthly payments.
States which expressly allow lump sum support include:
West Virginia, and
Alternatives to Monthly Alimony Payments
Caution: If you accept a lump sum alimony payment, you may face tax
consequences. For example, if you receive a lump sum payment that's referred
to as "alimony" in your divorce decree, you may be subject to taxes on the
full amount for that year. But if the same payment is called a "settlement,"
you may not be taxed. Don't sign any documents or agree to any terms until
you've consulted an expert, such as an accountant who specializes in divorce
Records to Keep When You Pay or Receive Alimony
You must keep adequate records if you are paying or receiving alimony. This
point cannot be over-emphasized. Frequently after a divorce, the spouses
dispute, or the IRS challenges, the amounts which were actually paid or
received. Without adequate documentation, the payer may lose the alimony tax
deduction and be ordered to pay back support if the other spouse makes a
claim in court.
Here are suggestions of records to keep:
Be sure to keep these records for at least three years from the date you
file the tax return deducting the payments.
- list showing each payment (date, check number, place where sent)
- original checks used for payments (keep in a safe place, such as a safe
deposit box) -- be sure to note on each check the month for which the
support is being paid, and
- a receipt signed by the recipient, if you pay in cash.
Make a list which shows each payment received. Include the following
- date payment was received
- amount received
- check number or other identifying document (for example, the number of the
- account number on which any check is written
- name of bank on which check is drawn or money order issued
- a photocopy of the check or money order, and
- a copy of any signed receipt you give for cash payments.