Is Indiana a 50/50 Divorce State?
If you’re going through or considering a divorce, you may be wondering, “is Indiana a 50/50 divorce state?” The answer is no, Indiana is not a 50/50 divorce state and therefore, marital property is not automatically divided up into equal shares. Generally, judges in the state of Indiana require equitable distribution when dividing property between divorcing parties. This means that the court decides what constitutes equal distribution given the context of the specific situation.
The division of property in an Indiana divorce can be a complex matter. Having to deal with the financial and legal complications, on top of the emotional aspects of a divorce, is often very difficult. In the event of a separation or divorce, an Indianapolis divorce lawyer at Keffer Hirschauer LLP can alleviate some of these burdens by helping you navigate Indiana divorce laws regarding property division and distribution, as well as tax considerations.
What is a 50/50 Divorce State?
In regard to the division or distribution of property in the case of divorce or separation, there are currently nine states that observe community property law, more commonly known as 50/50 divorce. This means that marital assets, as well as debts obtained by either party during the marriage, are divided equally, or 50/50. In addition to this, if the couple previously lived in an equitable distribution state and acquired property during that time, that property would also be divided equally between the two parties. This is called quasi-community property. For those filing for divorce in a community property state, it’s recommended to consult with a local divorce attorney to better understand the respective state laws surrounding property and asset distribution.
Community Property States:
- New Mexico
- *Alaska (residents may choose to opt-in to a community property agreement)
Equitable Distribution in Indiana
Regarding the original question, “Is Indiana a 50/50 divorce state?” The answer is no, Indiana is not a 50/50 divorce state. Divorce laws in Indiana, like most other states, require an equal distribution in a divorce or separation. This means that the court will determine what constitutes a fair division of marital property by weighing out various factors. In accordance with Indiana Code 31-15-7-2, equitable distribution is determined by evaluating each party’s needs, income or earning potential, and overall contribution to the marriage. The court may consider other factors as well, such as length of the marriage, property brought into the marriage by each party, the allocation of child-rearing responsibilities (if applicable), the tax basis of property received in the divorce, the tax consequences of the various distributions, and allocation of debt.
Can Community Law Apply to an Indiana Divorce?
Yes, in some cases, community law may apply to an Indiana divorce. For example, if the parties previously resided in a community property state while one spouse accrued certain retirement benefits, federal law may require the value of those benefits to be treated as community property. This may happen in the case of military pensions under 10 U.S.C. § 1408(c)(1) or for civil service pensions under 5 U.S.C. § 8345(j).
If this scenario applies to your situation, it’s critical that you discuss this matter with an experienced divorce attorney in Indiana. At Keffer Hirschauer LLP, we have helped dozens of clients understand what factors the court will consider when distributing property, the tax basis of property received in divorce, and more. Give us a call today at 317-857-0160 or schedule a free consultation.
What Properties are Eligible for Distribution and Division?
As per Indiana Code 31-15-7-4, unless the property was protected by a prenuptial agreement, any assets that were acquired either during or before marriage are considered marital property and will be included as part of the inventory for distribution. This even includes assets or accounts that are in the name of only one party or were transferred by one party prior to the divorce or separation. By law, both parties have a duty to disclose and present proof of all property owned. Additionally, both parties are responsible for all debts incurred during the marriage.
Indiana Code 31-15-7-4(b) states the manner in which property can be distributed in an Indiana divorce or separation may include:
- Division of property between the two parties
- Allocation of property to one spouse while the other receives compensation for their share
- Sale of property with the proceeds divided between parties
- Distribution of benefits, as described in IC 31-9-2-98(b)(2) or IC 31-9-2-98(b)(3) that are payable after the dissolution of marriage, by setting aside to either of the parties a percentage of those payments either by assignment or in kind
Is My Indiana Business Considered Marital Property?
In almost all divorces, the two parties find it very difficult to separate the proceedings from the rest of their lives. In a divorce involving business owners, there is an extra challenge: protecting the business. In accordance with Indiana Code 31-15-7-4, everything owned by either party is initially included in the marital pot subject to division. Therefore, a business owner would be wise to retain the counsel of an experienced Indiana divorce attorney, who can successfully argue to the court that the business should be taken out of the marital pot subject to division or set aside to one party without an equal offset to the other party.
Common Grounds for Removing a Business from the Marital Pot
- The individual spouse owned the asset before the marriage, and it remained an individual asset throughout the marriage
- The individual spouse acquired the asset during the marriage, and it remained separate from and not used for marital purposes
- The individual spouse acquired and maintained an asset before or during the marriage strictly with non-marital funds
In a worst-case scenario, a business could be awarded to the other in the divorce, leaving the original business owner without an income stream. A situation such as this may arise if the two parties, during their marriage, mixed both individual and marital funds into the business. Another example of this would be if the party without ownership in the business quit their job in order to contribute to the business. While the party without ownership did not contribute funds or assets to the business, they did contribute labor and incurred a loss of income in order to improve the property in dispute.
In situations where an Indiana business is a disputed property in divorce proceedings, it’s recommended to seek the counsel of an Indiana business owner divorce attorney. An experienced attorney may be able to prevent the division of the business and help distribute the property in a manner that might not interfere with business operations.
Tax Considerations in an Indiana Divorce
In accordance with IRS Code 1041, in the incident of divorce, no gain or loss will be recognized on transfers of property from an individual to a former spouse, as long as it occurs within one year after the date on which the divorce is completed or relates to the process of completing a divorce. Once 365 days have passed since the divorce was finalized, but no longer than six years, the divorce decree must clearly support the fact that the transfer of property was part of the marriage ending. After six years, transfers of property between the divorced parties are no longer deemed incident to the divorce for tax purposes, and the burden to prove otherwise and show valid delay is placed upon the spouse responsible for the tax.
The intricacies surrounding IRS codes are quite complex, and they are further muddied by the intersections of tax law and divorce. To fully understand this, one must first consider what types of property are commonly divided in a divorce, and how divided or distributed marital properties are taxed or will be taxed in the future.
*The information in this blog is for general informational purposes only and viewing or reading it does not create an attorney-client relationship. This blog is not a substitute for legal tax advice from a licensed tax attorney, accountant, or other tax professional. Please consult a licensed tax attorney, accountant, or other tax professional regarding your specific case or circumstances.
Types of Property Commonly Divided in Divorce
- Actual Property: Home, Condominium, Acreage, etc.
- Financial Property: Bank Accounts, Investment Accounts, Retirement Accounts, etc.
- Personal Property: Vehicles, Furnishings, Art, Jewelry, Electronics, etc.
Taxation and Property
When a court is determining what an equitable form of distribution is, under Indiana divorce laws pertaining to property, the tax basis of property received and the tax consequence of the transfer and ownership of various types of property should be considered. This includes all potential forms of tax including income tax, capital gains, and gift taxes.
When formulating an equitable distribution of property, it’s important to consider the context of each individual’s position on taxes, including income, investments, and pending tax liabilities or credits, and how those factors will impact the tax consequences of various distributions. It’s also important to factor in things like the cost basis of each spouse in the assets in question or what the division of that cost basis will look like between the two parties.
Why Do Tax Considerations Matter in Equitable Distribution?
The reason these factors matter is because it may be the case that, for tax purposes, a sale of property with proceeds distributed equally would be more beneficial for one, or both parties. In other cases, it might be more beneficial for one party to transfer a property like a home to the other in return for compensation, or for one party to continue living in the marital home while both retain ownership. When multiple types of property are involved, each with their own unique set of tax considerations, determining fair equitable distribution becomes much more challenging and requires the counsel of an attorney with extensive experience in both divorce and tax law.
Do You Need an Indianapolis Divorce Lawyer?
Whether you’re going through a divorce with little to no assets to divide, or going through a divorce with numerous, complex assets and property, you will need an attorney with extensive experience in family law to guide you. Keffer Hirschauer LLP is a litigation-focused firm dedicated to protecting the rights of our clients and capably steering them through the dissolution action so they can move forward and begin the next chapter in their life. For more information on 50/50 divorce in Indiana or how we can help in your divorce case, please contact Keffer Hirschauer LLP by calling (317) 648-9560 or completing this online contact form.