One of the challenges divorcing couples must face is dividing their marital property and assigning marital debts. Laws relating to property division in divorce vary from state to state. Some states require an equitable division, meaning that a couple must divide marital property fairly but not necessarily equally. Other states follow community property rules that require an equal split.
Alaska is an unusual combination of the two: It is an equitable property state with a law allowing couples to choose community property rules by executing a community property agreement or a community property trust. A couple can designate all property as community property, or can specify in their agreement that certain items, for example earnings during the marriage, will remain separate.
Couples may enter into community property agreements either before or during marriage. An agreement will only be enforceable against a spouse who entered into it voluntary and after full disclosure of all the other spouse’s property and financial obligations—or who voluntarily signed a written waiver of such disclosure.
Because community property agreements may have wide-ranging effects beyond the distribution of property in divorce, including effects on inheritance rights, spouses considering such agreements should seek the advice of an attorney.
Marital property is always divided at divorce. It generally includes assets and debts a couple acquires during marriage. Under Alaska law, certain categories of property remain the separate property of only one spouse unless a couple changes this by mutual agreement—for example through a prenuptial or postnuptial agreement, a community property agreement, or a community trust.
If there is no such agreement, separate property includes property one spouse owned before marriage or acquired during marriage by gift or inheritance, and property falling into one of the following categories:
Alaska law also states that mixing community and separate property will result in all of it becoming community property, unless the owner of the separate property can trace the source. For example, if a couple agrees that all their earnings during marriage will be community property and they deposit their earnings into a joint account, any separate funds that a spouse deposits into the same account will become community property as well, unless the spouse who deposits the separate funds produces financial records or other documents proving ownership. Another example would be where one spouse converts separate funds to community property by using the funds to pay down the mortgage on a community property home.
Another way that separate property may be converted—or “transmuted”—into community property is through if one spouse engages in work or management activities that substantially increase the value of the other spouse’s separate property. When a couple has agreed that all property they acquire during marriage is community property, such activity could create a community interest in the separate property, unless the contributing spouse received reasonable compensation. An example of this would be a business one spouse owns separately before the marriage that increases in value during the marriage due to the unpaid efforts of the other spouse.
If a couple does not have a community property or other agreement, equitable distribution rules will govern the property division. Alaska courts applying such rules frequently find that one spouse has converted separate property into marital property. A court may presume that a spouse who changed the title on a home from individual to joint ownership intended to make a gift of the home to the marriage. A court might even find an implied gift without a change of title, based only on conduct. Use of a home by both spouses for a period of years could be sufficient conduct to show that the original owner intended to gift the house; contributions in mortgage or tax payments, or physical management or maintenance of the home by the other spouse would be additional evidence.
After sorting out what property is to be divided, the couple, or the court, will assign a monetary value to each item. Couples who need help determining values can hire professional appraisers. Some financial assets, such as retirement accounts and pensions, can be very difficult to evaluate and you may want to get help from a financial professional, such as a C.P.A. or an actuary.
Spouses can divide assets by assigning certain items to each spouse, possibly with an equalizing payment if one spouse gets more than the other, or by selling property and dividing the proceeds. They can also agree to continue to own property together, for example by agreeing 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 of the spouses.
If a couple has trouble agreeing at any stage of the division process, they can get help from a mediator, either privately or through the court system. Judges in Alaska have a great deal of discretion in deciding what factors are important in an equitable distribution; if it seems unfair not to, they can even include separate property in the division. A judge will consider all of the following:
Alaska law does not allow a judge to consider fault of either party that may have contributed to the breakup of the marriage, but a judge may consider a spouse’s poor behavior if it has resulted in the waste of marital assets. Different factors will be more or less important depending on the specific circumstances of each individual case.