Will I Lose Everything in Divorce?

The answer is almost always no – and if at all it does happen, it happens in exceptionally rare situations. The following factors can help you understand just how much you stand to lose in a divorce:

• Violating the essence/terms of a prenuptial agreement
• The separate property angle
• Your state’s property distribution laws
• Extraordinary circumstances

General Note: Marital property includes real estate, income, and other assets acquired, and debts obtained, during the marriage and before separation. According to state laws, this is the property that is distributed among the spouses after the divorce.

Violating the Essence of a Prenuptial Agreement

A prenuptial agreement specifies the terms that govern the division of property, debts, and alimony in the event of a divorce. If the prenuptial agreement is executed properly, it takes precedence over your state’s property distribution laws, and the property is split according to its terms.

However, if the terms of the prenuptial agreement are unfair, dishonest (one spouse hiding assets), in bad faith, or one-sided as of the date of signing, then the agreement may not hold up in the courts. For example, when a wealthy spouse signs a 50/50 property distribution term in the prenuptial agreement, and his/her spouse files for divorce within a very short period, demanding that he/she be awarded 50% of the common marital property as specified in the prenuptial agreement, then such a demand may be considered as a demand in bad faith or unfair by the courts.

To answer the question of this post: If you have not contributed to buying any asset in the marriage and are walking out of the marriage within a few months without any valid reasons, or if you have hidden assets acquired during the marriage, then you may have violated the provisions of the prenuptial agreement, and you may not be entitled to marital property when you seek to enforce the agreement. In this sense, you may lose your rights to the common marital property in a divorce. If you did not own any separate property before marriage, then you may feel that you have lost your share of the common marital property. Actually, it is a loss of gain you might have been expecting out of divorce.

The Separate Property Angle

Property owned before marriage, which remains in the spouse’s name during the marriage, is considered separate property. It also includes inherited property or valuable gifts received during the marriage but kept in one spouse’s name, or property purchased during marriage out of funds received from selling some other separate property. This separate property belongs to the original owner and is not distributed in a divorce.

Now, assume a rare occurrence – both spouses do not acquire any assets during the marriage, and one spouse files for divorce. In such a case, there is no common marital property available to be distributed, and so both spouses may be left only with the properties they originally owned before the marriage. In this example, a spouse may feel that he/she gained nothing out of marriage, and instead ended up paying expenses such as court filing fees and divorce attorney’s fees.

Your State’s Property Distribution Laws

State laws distribute marital property based on either community property distribution law or equitable property distribution law. Property is generally distributed on a 50/50 basis in states that follow the community property distribution law.

In states that follow the equitable property distribution law, the courts consider factors such as the monetary contribution of each spouse towards the property, intangible contribution of a spouse to the marriage, how much separate property is owned by each spouse, the spouses’ economic condition and income-generating capacity, and other factors before distributing the property on a fair and equitable basis. The distribution may not necessarily be on a 50/50 basis, but ends up being 50/50 in most cases.

In general and in a majority of cases, if the marriage is normal, and either spouse has not committed any serious marital misconduct, then he/she does not lose everything in a divorce.

Extraordinary Circumstances

Assume that a wealthy person with a lot of separate property has married someone who possesses a fraction of his/her wealth. Now assume that things come to a head after a year of marriage and the couple files for divorce. If the marital property acquired during the marriage is insignificant, then in such a case the courts can award all the marital assets to the less fortunate spouse – the wealthy spouse may lose a 50% share of the common marital property, which would anyway be insignificant for him/her. To emphasize, while this could happen, it will only happen in the rarest of circumstances.

This was just one example, there may be others, but such situations occur very rarely.