One of the challenges divorcing couples must face is dividing their marital property and assigning marital debts. Laws governing property division in divorce vary from state to state. Georgia requires an equitable division, meaning that a couple must divide marital property fairly but not necessarily equally.
Marital Property and Separate Property
Marital property generally includes assets and debts a couple acquires during marriage. Certain types of property remain the separate property of only one spouse, including property each spouse owned before marriage or acquired during marriage by gift (not including gifts from the other spouse) or by inheritance, as well as property falling into one of the following categories:
- items purchased with or exchanged for separate property
- earnings on separate property, and
- any increase in value of separate property.
A spouse can convert separate property to marital property by changing title from individual to joint ownership during the marriage, in which case a court would presume that the spouse intended to make a gift of the property to the marriage. Marital and separate property can also be mixed together—sometimes called "commingling." For example, a premarital bank account belonging to one spouse can become marital property if the other spouse makes deposits to it. The spouse who originally owned the account could still claim some of the funds as separate property, but only by tracing the funds through financial records.
Where both spousees have contributed to an asset that increases in value during the marriage, Georgia follows the "source of funds" rule, which requires dividing the asset—or the value of the asset—in proportion to the contributions of marital and separate property. For example, if a divorcing couple were to sell a marital home for $400,000, and the home had been purchased separately by one spouse prior to the marriage for $200,000, the court would look at how much of that $200,000 price the purchasing spouse had paid prior to the marriage and how much both spouses paid during the marriage. If the purchasing spouse paid half of the price before marriage, then half of the sale proceeds—or $200,000—would be that spouse’s separate property, and the remaining $200,000 would be marital property. This type of calculation can get complicated, so you may need to ask for help from an expert.
Agreeing on Value
After sorting out what property is to be divided, the couple, or the court, will generally assign a monetary value to each item. Couples who need help determining values can hire professional appraisers. Some financial assets, such as retirement accounts, can be very difficult to evaluate and may require the assistance of a financial professional, such as an actuary or a C.P.A..
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, though most people don't choose this option because it requires continuing financial entanglement. But there are some situations where it makes sense--for example, 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 and debts, 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 a Georgia court might consider in dividing property include:
- 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 increased earning power of the other
- each spouse’s service as a parent, wage earner, or homemaker
- the source, type, and value of the property
- each spouse’s needs, considering both present circumstances and future opportunities to gain income and assets
- conduct of a party contributing to dissipation of marital assets, and,
- living arrangements for the couple’s children.
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 as important, and will be more likely to try to put the spouses back into the same situation each was in prior to the marriage.