Right after a divorce, and in the years that follow, the ex-spouses will think, obsess and even continue to fight over who gets what after the marriage dissolves. But when all the yelling is done, it often comes down to a matter of law. And so divorce and long-term asset issues go hand and hand.
What is marital property?
Basically, all property acquired in a marriage is usually considered marital property regardless of which spouse owns the property or how the property is titled. Even a spouse’s 401(k) is included. Marital property is all income and assets acquired by either spouse during the marriage. Yes, this includes pension plans, 401(k)s, IRAs and other retirement plans.
It also includes deferred compensation, stock options, restricted stocks and commissions, country club memberships, annuities, life insurance, brokerage and bank accounts, real estate, cars, boats, art, antiques, and tax refunds.
Community property states vs. equitable distribution states
There are nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. These states consider both spouses equal owners of all marital property, so a 50-50 split is the rule.
The remaining 41 states are equitable distribution states. In these states, the financial situation of each spouse is considered when dividing assets.
Some factors considered are:
- The length of the marriage.
- The income or property brought to the marriage by each spouse.
- The standard of living established during the marriage.
- The age and physical/emotional health of each spouse.
- The income and earning potential of each spouse.
- The financial situation of each spouse when the divorce is finalized.
- The contribution of a spouse to the education, training or earning power of the other.
- The needs of the custodial parent to maintain the lifestyle for the children.
What will the outcome be?
You can see that these factors make it difficult if not impossible to predict the outcome without knowing the intimate details of a particular family: are children involved and is either spouse dependent on the other one for long-term support? Also, a change in marital status can affect Social Security payments. If the marriage has lasted a certain length of time, a spouse can either claim his or her own benefits or the benefits on the ex’s record, whichever is higher. (Whatever choice you pick, however, has no effect at all on your ex or on any benefits your ex’s subsequent spouse gets.)
It’s easy to see why lawyers get involved. Sure, most folks want to stay out of court. And the large majority of all divorces are ultimately settled out of court.
The bottom line?
Don’t make assumptions about what possibly will be the long-term asset issues following your divorce. Are you in the process of a divorce or already divorced? Be sure to consider your estate plan. And know that it’s essential you speak with a professional. This is to make sure there are no unintended consequences down the line.
Click HERE to contact our firm to schedule your free consultation so that we can discuss your estate plan – and pending divorce – at length.
If you want to read more about Illinois and what consitutes marital property – click HERE.