The state that a couple resides in will have a major impact on the manner in which assets can be distributed in a divorce. There are two types of marital property laws a state can fall under: common law property and community property.
Most states abide by common law property rules. Under this system, property that is solely in one spouse’s name belongs solely to that person. If both spouses’ names are on a title or deed, then each own one-half of that property or asset. For example, if a husband goes and purchases a new vehicle five years into a marriage, but only has it titled in his name, then he would retain that vehicle in the event of a divorce. If he has it titled in both he and his wife’s names, he would have to make a choice in the event of a divorce. He could either choose to retain the vehicle, and pay his wife one-half of the current market value. He and the wife could agree that he could keep the vehicle, and she would sign her interest over to him free and clear. He could choose to give the wife the vehicle and sign his interest over to her, or both parties could choose to sell the vehicle and evenly split the proceeds. The idea of common property law is that both parties retain what is solely owned, then work out an agreement to divide remaining assets and compensate the difference.
A few states abide by community property laws. This means that all assets acquired during the marriage, regardless of which name is on a title or deed, are equal property of both spouses. It includes physical assets, income, debts, retirement, bank accounts and businesses. Under community property, a spouse may only manage his or her one-half of property. Therefore, agreement of both parties is required for any sell or disposal.
There are a few separate guidelines under which property can be disbursed depending on a situation, such as if one spouse dies. When attempting to negotiate these matters, it is always best to have the right legal information.