- Skye Gould/Business Insider
Estimates of divorce rates in America vary, but the reality is a great many marriages reach this unfortunate conclusion, and the aftermath is frequently messy, both emotionally and financially.
When a couple joins as one, their assets typically combine to form a marital estate, and anything they acquire thereafter becomes joint property. Upon divorce, those assets – including real estate, dependent children, income, cars, furniture, stocks, and retirement accounts – get divided between the former spouses.
Depending on the state you reside in, there are two ways your assets could be divided:
1. Community property: Marital assets – and debts incurred by either spouse during the marriage – are divided 50/50. However, separate property (anything held in only one spouse’s name, including property owned before marriage, given as a gift, or inherited) is not taken into account. The states that observe this law are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Residents of Alaska can opt-in to a community property agreement.
2. Equitable distribution: Marital assets (not including separate property) are divided “fairly” at a judge’s discretion, taking into account each person’s earning potential or income, financial needs, and personal assets.
To protect personal assets in either case, couples can set up a prenuptial agreement, which establishes terms for a division of assets in the event of a divorce.
Check the map to find out if the state you live in observes equitable distribution or community property law.