Property & Debt Division.

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Property & Debt Division in Washington State.

Property division is often one of the most important and immediate concerns after the decision to divorce has been made. What you need to know initially is that Washington is a community property state. In practice, this means that property you and your spouse have acquired during the marriage (except for gifts or inheritances) is considered community property and is owned jointly by both spouses. As such, unless there is an agreement to the contrary, your marital property should be divided equitably upon divorce. Disclosures regarding all assets is required by law.

As Washington is a “community property” state, all property obtained by either party during the marriage is presumed to be community property. Likewise, all debts incurred by either party during the marriage are presumed to be community debts. Community property can include not only cars and the contents of your home, but also real estate, businesses, and financial holdings. Unless there is specific evidence that a spouse has clear, sole ownership of a specific asset, property acquired during a marriage is presumed to be community in character.

Also, certain types of property are regarded as the separate property of one of the spouses – and certain types of debts are regarded as the separate debts of one of the spouses. Those include property obtained (and debts incurred) by the spouse prior to the wedding date and after the date of the parties physical separation from each other (i.e., when they start living apart). If the parties’ property and debts are going to be divided by the court at trial (rather than by agreement at a Mediation), the court will have before it (for dividing between the parties) all of the parties’ community property and community debt – and all of the parties’ separate property and separate debt. By statute, the court is required to make “ a fair and equitable distribution” of all of the parties’ property and debt.

Certain kinds of marital assets usually require special handling. For example, if the parties have ownership in a home or other real estate, and both parties are obligated on the mortgage, the real estate usually is divided as follows:

  • one party essentially “buys out” the other party’s interest in the real estate, by refinancing the real estate in his/her own name, or
  • the real estate is sold and the parties will split the sale proceeds.

Qualified Domestic Relations Orders (QDRO).

Another example involves certain kinds of investment accounts, e.g., pension accounts, retirement accounts, mutual fund accounts, 401(k) accounts, IRA accounts, and etc. Such investment accounts often are in the name of just one of the spouses. The divorce decree will specify how much of the investment account is to be allocated to the other spouse. The allocation to the other spouse is then affected with a Qualified Domestic Relations Order – which is commonly referred to as a QDRO. The QDRO is a court order that is directed to the plan administrator of the investment account. So, for example, if the husband has $300,000 in a 401(k) account through his employment, and the divorce decree awards half of his 401(k) account to the wife, the QDRO will direct the plan administrator for the husband’s existing 401(k) account to create a new and separate 401(k) account in the wife’s name only – and the QDRO will direct the plan administrator to fund the wife’s new and separate 401(k) account with $150,000 from the husbands existing 401(k) account . In this example, each party would then have their own, separate 401(k) account, each with $150,000 in it.

In the end, all of the parties’ personal property, bank accounts, real estate, investment accounts, and debts will be divided between them. The more property and debt the parties have, the more complicated the divorce process can be. A Divorce Attorney working in your best interests will be very knowledgeable about anything and everything to do with property settlement and division of community assets.

Property division is the “business end” of the divorce process. Therefore, it is important to have an attorney in your corner advocating for you and your long-term financial interests if you are involved in any property division issue. Appraisals may be needed, and forensic accounting may be necessary to determine if there are community property interests within separate property assets.

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