One of the challenges divorcing couples must face is dividing their marital property and assigning marital debts. Alabama law requires a division of marital property to be equitable, meaning that it must be fair. Some couples are able to agree on their own about how to divide property, while others use the help of attorneys or a mediator to negotiate a settlement. Couples who don’t manage to resolve property issues will end up going to court to ask for a decision from an arbitrator or a judge.
Whether you handle your own property division or a court handles it for you, there are three crucial steps to the process:
- determine whether the property (or debt) is marital or separate
- agree on a value for marital property, and
- decide how to divide the property.
Marital Property and Separate Property
Courts in Alabama treat most property a couple acquires during marriage as marital property. The law allows a judge to divide such property in any manner that the judge deems fair, regardless of which spouse actually owns the property. If a spouse owns property before marriage, or acquires it by gift or inheritance, a court will usually consider this to be the spouse’s separate property and will not divide it at divorce. The court might make an exception, however, if such property has been used to benefit both spouses during the marriage. For example, a court could consider the couple’s home to be marital property (in whole or in part) even if it belonged solely to one spouse before the marriage. Courts generally do this only in long marriages or in unusual situations—and it does not necessarily mean that the court will divide the asset equally between the spouses.
In a marriage that lasted 10 or more years, a judge may award one spouse a portion of the other spouse’s retirement accounts. Regardless of the length of the marriage, the court cannot include benefits a spouse earned before the marriage in the division. In addition, the covered spouse must be receiving benefits, or at least have a vested interest in the benefits, at the time the divorce is filed. The non-covered spouse cannot receive more than half of the benefits eligible for division and cannot begin receiving benefits until the covered spouse either begins receiving benefits or reaches the age of 65.
A couple making their own agreement can divide assets in whatever way they see fit. Some couples have a premarital agreement defining property as separate or marital; if there is a prenup, it can make dividing property much easier.
Marital and separate property can become mixed together—sometimes called "commingling." A premarital bank account belonging to one spouse can become marital property if the other spouse makes deposits to it; a house owned by one spouse alone can become marital property if both spouses pay the mortgage and other expenses. If the spouses aren’t able to decide what belongs to whom, the judge will have to decide whether any or all of the commingled property was a "gift" to the marriage or whether the original owner should be reimbursed in whole or in part.
The spouses—or the court if the spouses can’t agree – generally assign a monetary value to each item of property. Appraisals can help a couple determine the value of real property as well as items like antiques or artwork. Retirement assets can be very difficult to evaluate and may require the assistance of an actuary, C.P.A., or other financial professional.
Dividing the Property
Spouses can divide assets by assigning certain items to each spouse, or by selling property and dividing the proceeds. They can also agree to hold property together—this isn’t a very attractive option for many people, because it requires a continued relationship, but some couples agree to keep the family home until children are out of school. Others may keep investment property in hopes it will increase in value.
The couple must also assign all debt accrued during the marriage, including mortgages, car loans, and credit card debts, to one spouse or the other.
If the couple can’t agree on how to divide property, a judge will decide. There is no fixed formula for determining what is equitable; every case depends on the individual facts and circumstances. Examples of factors that an Alabama court will consider in dividing property are:
- the length of the marriage
- the age and health of each spouse
- the standard of living during the marriage
- one spouse’s contribution to the education, training, or increased earning power of the other
- services as a parent, wage earner, or homemaker
- the source, type, and value of the property
- tax consequences of the distribution
- the needs of each spouse, considering both present circumstances and future opportunities to gain income and assets
- other sources of income such as individual retirement, insurance, or disability benefits
- living arrangements for the parties children, and
- any fault of either party that contributed to the breakup of the marriage.
A judge will look at different factors in each case. In general, the longer a couple has been married, the closer to equal a property division is likely to be. In a short marriage, the court may not consider the standard of living during the marriage to be very important and would be more likely to try to put the spouses more or less back into the circumstances they were in before the marriage. Where one spouse owned a home separately prior to the marriage, a judge may award the original owner a higher percentage of the value even if the house is considered marital property. And a judge who believes that one spouse was primarily responsible for the breakup of the marriage may award a higher percentage of property to the other spouse.