Property division in a divorce can be more complicated than either spouse thinks. In general, all assets and debts will fall into one of three categories: Spouse A’s property, Spouse B’s property and the couple’s marital property. While the spouses retain their own property, states differ on how marital property is divided. Wisconsin, for example, is a community property state. Illinois, however, is an equitable distribution state.
In community property states, marital property is divided 50/50 between the spouses. Wisconsin is one of just 10 states (and Puerto Rico) that follow community property law.
Equitable distribution may result in a 50/50 split, but the decision is based on fairness rather than on equality. For example, a married couple buys an antique car, with Spouse A paying just 30 percent of the purchase price and Spouse B the remainder. If they file for divorce in Illinois, it is possible that Spouse A’s share of the value — even the increased value — will remain at 30 percent.
However, if they divorce in a community property state, the value of the car will be divided equally between them. Spouse A’s 30 percent stake will become a 50 percent stake.
What if Spouse B purchased the car with money inherited from a grandparent? Chances are that the car would not be marital property, so the full value will accrue to Spouse B.
Even if that inheritance was received during the marriage, if Spouse A was not a co-beneficiary, the entirety belongs to Spouse B. It would not be community property. The same is true of a gift made to just one spouse.
What kind of property is considered to be marital property? We’ll answer that in our next post.