What is Considered Marital Property in a Divorce

Property that is acquired during the marriage is deemed marital property. Marital property includes: 

• salaries that the spouses earn during the marriage
• retirement accounts they establish during the marriage
• property they purchase during the marriage 
• businesses they start during the marriage, and
• debts they enter into during the marriage.

Separate property is property that a spouse had prior to the marriage, such as earnings acquired before the marriage, and gifts or inheritances received during the marriage. Spouses can designate certain items as separate or marital property in ways that differ from the norm through a prenuptial agreement or postnuptial (after marriage) agreement. 

There are exceptions to these rules. When spouses improve upon separate property during the marriage, the work that the spouses put in can make the items marital property in a potential uncontested divorce in Madison County or anywhere else in Alabama. The amount of time, energy, and resources that a person spends matters. 

For example, say a husband bought a house before the marriage. If the wife later spent time fixing the house, the value of her contributions to improve it would be deemed marital property. A judge might find that the value of the work that the wife put in was divisible as marital property. Alternatively, the judge could find that the entire house had become marital property. 

Decorating the house with items of personal property such as furniture might not count as improving the house. This is because the personal property itself can be sold. The proceeds can be divided. 

In Alabama, a court may choose not to split the value of marital property down the middle. If the spouses do not present the court with a marital settlement agreement (MSA), a contract on how to divide their property, the court will make the most reasonable and equitable decisions possible.  

For example, the court may decide that one party should keep the house. The other party can be compensated with funds equal in value to their portion of the house. If the couple has minor children, this is a factor in the court’s decision. If one party will remain in the family home and have primary custody over the minor children, this will further push the court not to order that the house be sold, and the proceeds be split. When reviewing a business, the court will look at which parties worked for or contributed to the business. They will also look at the amount of effort and time the spouses put into the business and the resources they utilized to fund the business. 

If the spouses get legally separated before the divorce, the earnings and assets that either spouse accumulates after the legal separation are considered separate property. This includes funds in and interest from retirement accounts. Say a party has a retirement account that they have established before or during the marriage and contributes to that account after the legal separation. The couple may need to hire an accountant. The accountant can help them figure out what portion of the retirement account and interest on it is marital property.

Debts that a party acquires before marriage are separate property. Debts that couples enter into during the marriage are marital property. For example, if both parties took out a home loan, the home loan is considered marital property in an uncontested divorce in Lee County or wherever you live.

Student loan debt is an exception to this rule. Even if a person took out a loan during the marriage, the name on the loan determines that they are the one who must pay it back. If the student loan is only in the name of the person who took it out, the creditor will only look to them to satisfy the debt. 

If both spouses’ names are on the loan paperwork, then the party who went to school and their former spouse bear responsibility for repayment. Typically, a private lender requires another person to cosign for the primary borrower. A spouse who cosigned on their partner’s student loan can be targeted for repayment.

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