Couples going through a divorce must decide how to divide their property and debts—or ask a court to do it for them. Louisiana has community property laws providing that all of the assets and debts a couple acquires during marriage belong equally to both spouses. A judge dividing community property must make sure that each spouse receives property of equal net value.
In deciding whether a specific item of property or a specific debt should go to one spouse or the other, a judge will consider all relevant factors, including the nature and source of the property or debt and the economic condition of each spouse.
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 community or separate
- agree on a value for community property, and
- decide how to divide the property.
Community Property and Separate Property
There is a strong presumption under Louisiana law that all assets and debts a couple accumulates during marriage are community property. Property one spouse owned alone before the marriage, or acquired by gift or inheritance during the marriage, is that spouse’s separate property, as long as the spouse can prove the claim with financial records or other documents.
Spouses may change an asset that was originally separate property into community property, or vice versa. For example, a spouse who was the sole owner of the family home before the marriage could change the title to community property, and a court would consider this evidence that the owner intended to make a "gift" of the home to the marital community.
Sometimes a spouse changes a separate asset into a community asset without meaning to by combining—or “commingling”—separate property with community property. A premarital bank account belonging to one spouse can become community property if the other spouse makes deposits to it; a house owned by one spouse alone can become community property (either in whole or in part) if both spouses pay the mortgage and other expenses. Many types of assets can be partially community and partially separate, including retirement accounts that one spouse contributed to both before and after the marriage, or a business one spouse started before marriage and continued operating after marriage.
Distinguishing community property from separate property can become very complicated, especially if one spouse owns a business or other asset to which the other contributed labor or funds during the marriage. If you have a complex property situation, you may need to consult an attorney for advice. Spouses who can’t decide what belongs to whom will have to let a court decide whether commingled property was a gift to the marriage or whether the original owner should be reimbursed in whole or in part.
Determining Property Value
The spouses—or the court if they 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, by allowing one spouse to "buy out" the other’s share of an asset, or by selling assets and dividing the proceeds. They can also agree to hold property together even after the divorce. Although continuing to hold property together isn’t a very attractive option for most people, since it requires a continued relationship, some couples agree to keep a family home until children are out of school. Others may keep investment property, hoping that 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 of the spouses. Couples dividing debts should be aware that their separation agreement or divorce order is not binding on creditors, who may continue trying to collect a community debt from either spouse. If a debt is assigned to one spouse, the other can ask the court to put a lien on that spouse’s separate property as security for payment of the debt. However, it’s a better practice to try to pay off all the marital debts when the divorce is finalized—if you are selling the family home or one spouse is buying the other out, a refinancing of the house loan may provide an opportunity to do this.