Defining Equitable Distribution of Property in an Alabama Divorce

Posted by Steven D. Eversole | Oct 13, 2013 | 0 Comments

Next to issues of child custody, the question of how property should be divided is usually the second-most contentious issue in any Birmingham divorce.

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Although we are an equitable distribution state, you generally aren't going to see property divided 50-50. While that's a starting point for the courts, the judge is going to look at what is going to be the most fair for all parties involved. Fairness might not necessarily be a down-the-middle split.

For this reason, it's critical that you hire a divorce attorney who understands that just because two items are technically valued at the same amount doesn't necessarily mean they are worth the same.

For example, let's say you have two retirement accounts, both valued at $400,000. It would seem an easy call to give one to one party and the other to the other. However, there are certain accounts for which withdrawals or transfers may come with hefty fees, making one in actuality worth significantly less than the other.

Or consider that one person may want the house and another the retirement account. Even if both are technically valued at roughly the same amount, that doesn't mean a sale of the house would yield the same kind of returns that the retirement account will. Plus, there could be hefty property tax considerations or external housing market variables that could cheapen the value of the property.

In many cases when it comes to a jointly-owned home, many couples find it easier to simply sell it and split the proceeds. Usually, this stems from the fact that neither wants or can afford to live in the home solo after they separate. What makes it more complicated is when the home isn't worth as much as what they owe. In those situations, the couple has to mutually agree to take a hit on the sale price and any costs associated with the sale.

Alternatively, they could choose to become joint landlords until such time that the market rebounds and the house is once again valued at an amount that is at least closer to what the pair owed. This scenario usually only works if the couple has separated amicably.

Another option to which some couples agree involves one spouse continuing to reside at the home and assuming all or the majority of the payments. This is an option that requires careful planning, though, especially if both names are on the original mortgage. The reason is that no matter what the divorce agreement says, it will not supersede the lender agreement.

So let's say your ex defaults on that mortgage payment. You will still be on the hook for those payments. You could later decide to sue your ex in civil court to cover the difference of whatever you're forced to pay, but that will be more money out of your pocket in the long-run.

Another possible downside to this scenario is that if you go to apply for a new loan while your name is still technically on the old one, you may be turned down for having a debt-to-income ratio that's too high – even though you aren't actually on the hook for that mortgage debt.

In these cases, we encourage the exploration of a mortgage refinancing option so that the spouse who intends to continue living in the home can secure the property solely in his or her name.

As these instances show, equitable distribution of property is not always so clear-cut. Let us help you explore your options.

If you are seeking a divorce in Birmingham, contact Family Law Attorney Steven Eversole at (866) 831-5292.

Additional Resources:

Splitsville? How to divide property in a divorce, Oct. 7, 2013, By Geoff Williams, Reuters

About the Author

Steven D. Eversole

J.D., Samford University's Cumberland School of Law, Birmingham, Alabama B.A., University of Alabama, Tuscaloosa, Alabama

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