Louisiana Divorce: Dividing Property

How is marital property divided in a Louisiana divorce? Find out here.

Is Louisiana a Community Property State?

Yes, Louisiana is in the minority of states that follows community property laws. Most states adhere to equitable distribution principles, but Louisiana isn’t one of them. Louisiana community property laws seek to divide a couple’s property equally in a Louisiana divorce.

Community Property and Separate Property

There’s a strong presumption under Louisiana law that all assets and debts a couple accumulates during marriage are community property. Separate property is property that one spouse owned alone before the marriage, acquired by gift or inheritance during the marriage, or property covered by a prenuptial agreement. Usually, a separate property claim must be supported with financial records or other documents.

An asset that was originally separate property can become community property through intentional or inadvertent commingling (mixing separate and community property). For example, one spouse’s separately-owned home can lose its separate character and become marital property if the spouse uses marital funds to renovate and maintain the house. A premarital bank account belonging to one spouse can become community property if the other spouse makes deposits to it.

Many types of assets can be partially community and partially separate, including 401(k) 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. See La. Civ. Code § 159 (2020).

Are Student Loans Community Property in Louisiana?

The answer depends on when the student loans were taken out. Under Louisiana’s community property laws, a simple “I do” could increase or reduce a spouse’s personal student loan obligation by 50 percent. Student loans taken out during a couple’s marriage are considered a community property debt. This means both spouses are responsible for repaying one spouse’s student loan obligation. Yet, a spouse who uses community funds to pay for student loans taken out before the couple’s marriage will have to reimburse the community estate. Any student loans takes out prior to marriage are considered that spouse’s separate debt. See La. Civ. Code § 124 (2020).

Determining Property Values

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, original artwork, and business interests can be very difficult to evaluate and may require the assistance of an actuary, C.P.A., business evaluator, or other financial professional.

How Will a Judge Divide Community Property in Louisiana?

Couples going through a divorce can decide how to divide their property and debts by reaching a settlement agreement, or they can leave property division up to a judge. Louisiana’s community property laws assert that all debts and assets acquired during a couple’s 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 several factors, including:

  • the nature and source of the property
  • each spouse’s finances
  • each spouse’s earning capacity and work history
  • each spouse’s age, physical and mental health
  • any alimony awards
  • child custody (as it pertains to keeping children in the marital home), and
  • any other relevant factor.

Whether you handle your own property division or a court handles it for you, there are three crucial steps to the process:

  • identifying the property as community or separate
  • property valuations for community property items, and
  • deciding how to divide the property.

Divorce Property Settlement Agreements in Louisiana

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. Couples can reach a settlement agreement on their own or with the help of a mediator. A judge must approve any property settlement agreement to ensure that not unfairly one-sided and serves the best interests of the couple’s children, if any.

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. 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.

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.

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