How is Community Property Split During a Louisiana Divorce?
While no couple enters a marriage expected it to end, it is important to understand how marriage will affect your rights in certain property and how those rights will be handled in the case of a divorce. Louisiana is what is known as a “community property” state, a fact which has important implications on property ownership during a marriage and after it is ended.
Read on to learn more about community property and how it is divided in the case of divorce in Louisiana.
What is Community Property?
Community property is a system of rules that govern ownership and management of property between married individuals. The default rule in Louisiana is that a married couple is subject to the state’s community property rules by default. To understand what is considered community property, it is first important to understand what the state considers separate property – or property that is owned by just one spouse. Louisiana defines separate property as:
- Property acquired by a spouse prior to the marriage;
- Property acquired by a spouse during the marriage but only with separate property (such as income earned before the union);
- Property acquired by a spouse during the marriage with a combination of separate property and community property but where the value of the community property is inconsequential to the overall acquisition;
- An inheritance or donation directly to one spouse; and
- Damages awarded to a spouse in connection with the spouse’s separate property or any action against the other spouse.
Under Louisiana’s community property law, the following categories of property acquired during a marriage are considered jointly and evenly owned by the couple:
- Property acquired through the effort, skill, or industry of either spouse;
- Property acquired with any community asset;
- Property donated to the spouses jointly;
- Natural and civil fruits of community property, meaning anything derived from the property, such as milk from a cow and then the profits from selling the milk;
- Damages awarded for loss or injury of things belonging to the community; and
- All other property not classified by law as separate property.
The above categories form the presumptive ownership of property assuming the couple doesn’t enter into an explicit arrangement that differs.
Can Community Property Rules Be Changed?
If a couple does not wish to be bound by the Louisiana community property rules, it must contractually agree to a different arrangement. This is often referred to as a prenuptial agreement (when entered into prior to marriage) or a postnuptial agreement (when entered into after the couple is married). In such an agreement, a couple can agree that (1) all property be deemed separate property; or (2) specific property be designated separate property.
In order to have a valid prenuptial agreement, there must be mutual agreement between both spouses. The agreement must be executed before a notary public (or appropriately acknowledged by a notary public) and be signed by two witnesses. To establish a postnuptial agreement, the couple must file a joint petition before a court to explain why it is in the best interest of each spouse to create a different agreement regarding marital property.
How Will Community Property be Divided?
While the community property laws clearly delegate which items are jointly owned by the couple, determining how to divide the assets can be much more complicated. There are several common methods for dividing assets:
- Allowing one spouse to “buy out” the other’s interest in the property, which is common for real estate;
- Selling assets and dividing the profit;
- Assigning similarly valued property to each spouse; and
- Continuing to hold the property together, an option that is most commonly leveraged for a family home when children are involved or for investment property that may increase in value.
How property is divided between the couple will depend on whether the couple agrees on a proposed division. If they are able to come to a reasonable agreement on the division of assets, they may be able to seek an uncontested divorce. In this scenario, the court will accept the proposed division as long as it is fair and equitable to both parties.
If the parties are unable to reach agreement on division of community property, the court will need to become involved. One asset that is often difficult for parties to come to agreement on are retirement assets, especially pension plans where valuation at the time of divorce is less concrete. Retirement assets can become even more complex, sometimes requiring a Qualified Domestic Relations Order. If you are having trouble understanding the requirements for dividing assets, an experienced attorney can help.
How is Debt Handled?
While assets may be front of mind, the couple will also have to confront debt that has been accrued during the marriage. This can include mortgages, credit card debt, and car loans. The debt will generally be divided evenly between the couple.
It is important to note, however, that a couple’s agreement or even a divorce order are not binding on the creditors. A creditor may try to collect community debt from either spouse. If a creditor is pursuing the spouse who is not responsible for a certain debt after the divorce, they may need to seek court support. The court may place a lien on the responsible spouse’s separate property as security for payment of the debt by the non-responsible spouse. To avoid this complication, the couple should prioritize paying off marital debts at the same time the divorce is finalized.
Contact a Licensed Attorney for Help
If you are considering divorce or are in the process of seeking a divorce, it is important to understand which of your assets are subject to community property rules. You should also consider the debts currently held by you and your spouse and how those responsibilities will be divided.
A licensed attorney can help you understand what property you can claim as separate property and determine the value of community property assets and your right to an equitable distribution of those assets. Contact Betsy A. Fischer, LLC today for an evaluation of your case.