Division of Assets
No matter what the circumstances of your divorce may be, you’ll need to address the division of assets. This is particularly challenging for high net worth couples, who often have a substantial variety of assets that must be valuated, assessed, and split in accordance with Alabama’s equitable distribution laws.
When it comes to dividing assets, there is a lot of room for negotiation and compromise. This puts you in a position where you can decide what is a priority to you and where you are willing to yield a bit. Not sure where to start? Kirk Drennan Law is here to help. Give us a call at 205-803-3500 to schedule a consultation now.
How Assets Are Divided in Alabama
Alabama follows the equitable distribution system, which is the same system used by dozens of other states. Rather than presuming that both parties deserve half of the marital assets, this system considers a wide range of factors when determining how to divide marital assets.
The first step is to determine which assets are marital and which belong to one spouse. From there, a number of factors are weighed to determine what would be a fair and just distribution. Some of the factors that apply in Alabama include:
- Monetary contributions made to the marriage
- Non-monetary contributions made to the marriage
- Each spouse’s current income and ability to earn an income after the end of the marriage
- Fault within the marriage, such as adultery or abuse
- How parenting time will be split after the divorce
- The duration of the marriage
- If one partner paid for the education or career growth of the other
- Standard of living enjoyed by both parties during the marriage
- Each spouse’s age and overall health
By considering these factors, the court can divide assets in a way that is fair to both parties. For example, a partner in generally poor health with no income or career experience is unlikely to have the same earning potential as a spouse with a high income and excellent health. In this case, the lower-earning spouse in poor health would likely receive a larger share of the assets.
This also allows for variations within marriages where one party is the breadwinner, and one is a homemaker. If the stay-at-home partner allowed the other spouse to grow in their career due to the homemaker’s sacrifices, their contributions should be given as much weight as monetary contributions.
Marital and Separate Assets
As noted earlier, this whole process begins with a determination of which assets are marital in nature and which are separate in nature. Separate property generally includes:
- Property obtained prior to the marriage
- Gifts given to one individual in the marriage
Note, though, that a separate asset may become a marital asset during the course of the marriage. If one spouse uses a separate asset to benefit the family or fund the marriage, that asset may then be considered marital.
Marital property generally refers to anything obtained during the marriage. These assets are subject to division. If your divorce is contentious or your spouse is worried about you obtaining a greater share of the assets, they may tell you that some assets are separate when they are actually marital.
This is why it is important to have your own divorce attorney, rather than taking advice from your ex-partner or their attorney. Making decisions based on your ex-partner’s advice could cost you a lot.
Your goal during this process is to protect your own best interests. This doesn’t mean that you have to be confrontational or adversarial about it. It simply means that you don’t have to give up everything in order to keep the peace.
While some partners go into this process ready to burn every bridge they have in order to get a little bit more property, others are willing to go without for the rest of their lives to avoid upsetting their spouse. The decisions you make during a divorce will affect you the rest of your life. Don’t give up the assets you’ll need in your post-divorce life just to avoid upsetting your ex-partner.
What Assets Are Protected from Divorce Settlements?
Gifts and Inheritances
Gifts given to one party are considered separate property, and therefore, they are not split up during a divorce. However, this does not apply to gifts given to the couple and used to benefit the marriage. If you have gifts that you consider exclusively yours, be ready to prove that they should not be considered marital property.
Inherited items also fall into this category. Even if you receive an inheritance during the marriage, it will be considered separate property as long as it has been kept separately from your marital assets.
Property Brought into the Marriage
If one spouse enters the marriage with assets, those assets will remain their separate property in the event that the marriage ends. There are obvious exceptions to this. If a separate asset is used by both parties for the benefit of the marriage, it will likely be considered a marital asset. Consider, for example, a house owned by one party prior to the marriage. After they marry, the couple moves into the house, pays for its bills and upkeep, and benefit from it. At that point, the house would likely no longer be considered a separate asset.
Some types of assets are considerably more complicated than others. While it’s relatively easy to split up checking accounts, cash on hand, and savings accounts, what about real estate and retirement accounts?
The marital home is an incredibly important part of the divorce settlement for many couples. Whether you want to keep the home, sell your share to the other party, or sell the house outright, you likely have equity built up that you’ll want to protect. The same is true if you and your spouse have vacation or rental properties that may be a source of passive income for one of you.
Retirement funds are another complicated topic. Per Alabama law, the court can only award retirement assets if the marriage lasted at least ten years. If you and spouse do negotiate a division of retirement funds, there’s more work to be done. Failing to transfer these assets in the proper way can lead to massive tax penalties and fines that significantly decrease the value of your assets.
You’ll also need to consult your attorney if you or your partner own a business. Dividing a business during a divorce is a multi-step process that requires full valuation, predictions of future earnings and growth, and an analysis of each party’s contributions to the business.
Filing a Quitclaim Deed and Handling the Mortgage
By transferring a home during the divorce, rather than waiting until after the divorce is finalized, you can avoid negative tax consequences. One document you will need is a quitclaim deed. The quitclaim deed simply gives up the grantor’s interest in the property to the grantee. It’s a straightforward document that does not do anything other than transfer one’s share of real estate to the other party. The financial aspects of the transfer are handled in the divorce settlement and the refinancing of the home.
The party keeping the home will also need to refinance the home in their name only unless another agreement is reached. This is often a challenging aspect of high asset divorces if one party is the high earner, and the other has limited or no income. If you’re concerned about whether or not you’ll be able to keep the family home, make sure to bring it up when you meet with your attorney.
Get in Touch Today to Set Up a Consultation
Dividing your assets can be a stressful part of divorce, but it’s a necessary part of the process. With strong legal representation by your side, you can feel confident fighting for what you want. Ready to get started? Call Kirk Drennan Law at 205-803-3500 or fill out our online contact form to set up a time to talk.