Division of Property

LOUISIANA COMMUNITY PROPERTY

GENERAL COMMUNITY PROPERTY

The concept of community property and how it is divided is a frequently visited issue when it comes to divorce.  Oftentimes people are unsure of what they will be left with after a divorce.  Louisiana recognizes the concept of community property and the matrimonial regime.

Automatically on the date of marriage, the couple enters into something called a matrimonial regime.  The matrimonial regime is defined in Louisiana statute as a system of rules that controls the ownership and management of property between married persons and to third parties.  Essentially, the matrimonial regime determines when, and who property obtained during marriage can go to.  There are three types of matrimonial regimes; legal, contractual, and partly legal partly contractual.

PROPERTY

In divorce proceedings, the term property means more than just land.  The term property refers to both tangible and intangible property.  Tangible property includes land, houses, structures, vehicles, boats, campers, and electronics.  Intangible property includes bank accounts, retirement funds, and pensions.

ACQUISITION

Acquisition is the means by which you obtain property.  Property may be acquired through purchase, gift, donation, intestate, or a will.  If you are acquiring property with separate funds, it may be helpful to obtain a declaration of acquisition of separate property in order to help overcome the presumption of community property.

PROPERTY CLASSIFICATION

All property must be classified as either separate, or community.  Anything you acquired prior to getting married would be considered your separate property.  Once you are married, and you and your spouse acquire property together, all of that would be community property.   That means not only things purchased after you were married, but things donated to you and your spouse jointly and anything purchased with joint funds.

For example, the truck that you purchased when you graduated high school prior to your marriage would be considered separate property.  However, the house, camper, and savings account that you and your spouse acquired after getting married would be considered community property.

The classification of property, whether it is separate or community, does not change.  Separate property belongs completely to the person who acquired it.  Community property gives one half interest to each spouse.

FRUITS OF SEPARATE PROPERTY

Fruits are things that are produced by or derived from another thins without diminution of its substance.  Generally, the law observes two types of fruits, natural and civil.  For example, cows produce both natural and civil fruit.  The milk obtained from the cow is a natural fruit; something that occurs naturally without interference.  The money made from selling the milk is a civil fruit; revenue generated that required interference.

Under Louisiana law, both the natural and civil fruits of separate property of a spouse are community property.  That means that if you own fifty cows prior to marriage, the cows, milk and money from sales are yours solely.  However, beginning the date of marriage any further milk or revenue made from the cows is community property, while the cows still remain your separate property.

A spouse may reserve fruits of his separate property by an authentic act, or under an act acknowledged by a notary.  Consult with your attorney if you wish to, or think you may have reserved the fruits of your separate property.

PRESUMPTION OF COMMUNITY PROPERTY

In Louisiana, there is a presumption that all assets and debts acquired during the marriage are community property.  During the partition of community property, this presumption needs to be rebutted in order to secure the separate property of each spouse.

COMMINGLING

Sometimes spouses commingle separate property into community property.  For example, a spouse that has $10,000 of separate funds deposits the money in a joint (or community) bank account.  When commingling occurs distinguishing separate property from community property can become very difficult.  Close records and documentation will be examined in order to rebut the presumption that all property is community.

MATRIMONIAL REGIME

Automatically on the date of marriage, the couple enters into something called a matrimonial regime.  The matrimonial regime is defined in Louisiana statute as a system of rules that controls the ownership and management of property between married persons and to third parties.  Essentially, the matrimonial regime determines when, and who property obtained during marriage can go to.  There are three types of matrimonial regimes; legal, contractual, and partly legal partly contractual.

It is easiest to think of a legal regime as the “base” regime.  The legal regime resembles the default regime that you and your spouse will fall under if no actions are taken to form a different type of regime.

A legal regime is the “community of acquets and gains” and applies to all spouses domiciled in Louisiana, regardless of where they were married.  Basically, a legal regime is all past, present, and future community property.

Imagine the legal regime is a treasure chest, and everything inside is community property.  The treasure chest only opens by using two keys; one that you have, and one that your spouse has.  During the time of your marriage, the treasure chest is always open.  Everything you earn and acquire is placed in the treasure chest and everything your spouse earns and acquires is as well.  If the time comes that you and your spouse decide to file for divorce, at some point during those proceedings, the treasure chest will be shut.  Once it is closed, everything you or your spouse acquires from that day forward belongs to each of you as separate property.

When the time comes for the division of community property, you and your spouse will either have an agreement or a court order itemizing what each of you will take out of the treasure chest.  In a legal regime, since you and your spouse each have a key, you are each entitled to exactly one half of anything in the treasure chest, regardless of how much each of you contributed to it.

As simply put, a legal regime entitles each you and your spouse to one half of all community property.

CONTRACTUAL REGIME

A contractual regime is sometimes referred to as a prenuptial (or postnuptial) agreement.  Since under a legal regime, all community property is divided in half, with a matrimonial agreement you and your spouse can agree to keep all property as separate property, even after you are married.  To be a complete contractual regime, the agreement, also referred to as a matrimonial agreement, would need to establish that all property is to be classified as separate.  Since the base legal regime comes from Louisiana statutes, the matrimonial agreement is subject to certain limitations that can not be contracted around.  One example of such limitation is the inability to waive interim periodic spousal support.

In order to form a contractual regime prior to marriage, you and your spouse must have written agreement, mutually agreed upon.  The agreement must be executed before a notary public, or other officer authorized to perform that function, with two witnesses who sign the document, along with the spouses and the notary.  Alternatively, the spouses may sign the written agreement in private, and later acknowledge to a notary public that each signature is their own.

After marriage, should you and your spouse decide to form or modify a contractual regime, you must file a joint petition to the court, explaining why it is in the best interest of each spouse to have a contractual regime, and obtain court approval.

A part legal part contractual regime is exactly as it sounds.  In this regime, you and your spouse would agree upon specific property being classified as separate.  This means that the provisions of a legal regime that have not been altered by an agreement, remain in effect.  The process for forming a part legal part contractual regime are the same as when forming a contractual regime.

SEPARATION OF PROPERTY REGIMES

SEPARATION OF PROPERTY GENERALLY

As discussed on the General Community Property page, a matrimonial agreement may establish a contractual regime under which the property of the spouses will be separate.  Spouses may also separate property when they have been living apart for six months, a petition of divorce has been filed, one spouse is absent, or one spouse’s interest in community property is threatened by fraud, fault, or incompetence of the other spouse.  Once the spouses establish separate property regimes, concerns of how to manage the property or contribute to the marriage may arise.

As to be expected, every situation is different.  For some couples, maintaining the legal regime of community property works well.  For others, having a matrimonial agreement with separate property regimes works well.  Whatever the case may be, consult with your spouse and come to a decision that is in both of your best interests.

MANAGEMENT

When property is in separate regimes, each spouse may use and enjoy their own property as they wish, without the consent of the other.  This means you can purchase, sell, gift, use, and donate any of your separate property as you see fit.  However, there will still be questions regarding shared expenses and shared liabilities.

SHARED EXPENSES

When it comes to expenses of the marriage, or shared expenses like bills, each spouse is to contribute as stipulated in the matrimonial agreement.  Ideally, a provision in the matrimonial agreement would state percentages of what expenses each spouse is to pay for, or which spouse pays for which shared expense.  For example, in the matrimonial agreement the husband may agree to pay for the vehicle notes and mortgage, and the wife may agree to pay for utilities, groceries, and insurance.  The amounts stipulated to in the matrimonial agreement by no means have to be equal.

The spouses may choose to have one pay for more shared expenses over the other, so long as both spouses freely agree to that.  If there is no provision in the matrimonial agreement that lays out the shared expenses that each spouse pays for, each spouse will contribute in proportion to his means.  This means that if the husband makes $70,000 a year and the wife makes $30,000, the husband will pay for 70% of the marital expenses and the wife will pay for 30%.

A spouse may seek reimbursement if they used their separate property to benefit the other spouse’s property.  For example, if the husband pays to repaint the house that the wife owns, the husband may seek reimbursement for the cost of painting.

SHARED LIABILITIES

As far as liability is concerned, each spouse is liable with the other spouse when an obligation for necessaries for himself or the family is incurred.  This means that if a spouse purchases a new vehicle and fails to make payments, the creditor of the vehicle may recover the debt from the other spouse.

PARTITION

PARTITION OF COMMUNITY PROPERTY

Once the matrimonial regime is terminated, either by court order or an agreement between the parties, the process of dividing the community property in accordance with the order or agreement may begin.  This is referred to as the partition of community property.  Generally, this can happen prior to the finalization of the divorce so that the parties may begin to move forward and rebuild.

Partition of community property can happen in two ways; non-judicially or judicially.  Non-judicial partition, also referred to as voluntary or extrajudicial partition, can occur before or after the termination of the community property regime and without court approval.  In order to initiate a voluntary partition, the parties should file their partition agreement in any parish where they own immovable property, as well as the parish where they are domiciled.  While voluntary partition agreements do not require court approval, it is important that the parties still submit the agreement to the court should complications or disputes arise in the future.

Since the partition agreement at its core is a contract, there are certain grounds on which it may later be challenged such as lesion or nullity.  It is advised to consult with an attorney in drafting your partition agreement in order to avoid challenges to the agreement in the future.

If you and your spouse are unable to come to an agreement, or one spouse is unrepresented as an absentee, or a minor or mentally incompetent, a partition proceeding will need to be initiated judicially.  Either party may submit a motion to the court to partition property.  Within forty-five days of service of the motion, each party must file a detailed list of all community property that includes the fair market value and location of each item, as well as all community liabilities.  Each party will have to affirm under oath that the detailed list contains all known assets.  Within sixty days after the detailed lists are served, the parties must either traverse or concur in the inclusion or exclusion of each asset or liability on each detailed list.  From there, the court will then determine the settlement of the community and the partition of the community property.  This means that the court will classify the assets as community or separate, obtain the appraisal of each asset, and allocate the assets and liabilities to each of the parties.

The court will partition the community by:

  • Valuing the assets as of the time of trial on the merits, determine the liabilities, and adjudicate the claims of the parties;
  • Dividing the community assets and liabilities so that each spouse receives property of an equal net value;
  • Assigning the respective spouses all of the community assets and liabilities;
  • Equalizing the distribution, should the allocation of assets and liabilities be unequal, by ordering the payment of a sum of money.

Once a non-judicial partition or a judicial partition is rendered, the parties must abide by the language of the partition.  As you can see, a non-judicial partition usually does not take as long as a judicial partition, and it allows the parties greater flexibility in determining the division of assets and liabilities.  When a non-judicial partition is not an option, judicial partitions are effective in securing an order that all parties must abide by, regardless of previous disputes and contentions.

WHO GETS THE HOUSE?

Two of the most common questions that arise during the division of property include:

  • Who gets to own the house?
  • Who gets to live in the house until the divorce is final?

When divorce proceedings are initiated, who will be staying in the house during the pending litigation is one of the first things that will need to be sorted out.  In doing so there are a few things to consider.

You and your spouse may come to an agreement outside of court regarding who will be living in the house.  You should be aware that in doing so, the spouse who agrees to leave the house will lose their right to a rental reimbursement claim (this right may be reserved if in the written agreement the spouses include language protecting the rental reimbursement claim).  Rental reimbursement is payment reimbursing the spouse who moved out for one half of fair rental value.  This is further discussed on the Rental Reimbursement page.  The spouse who remains in the house will be required to pay the full monthly mortgage payment on the house, but is entitled to a mortgage reimbursement claim.  A mortgage reimbursement claim will allow the spouse who remains in the house to recover one half of the mortgage payments from their spouse.  More information can be found on the Mortgage Reimbursement page.

If you and your spouse cannot come to an agreement about who will remain living in the house, the court will order one spouse to leave after a contradictory hearing.  Generally, the spouse in custody of the child will be awarded occupancy of the marital residence.  The court will take into consideration the income of each spouse, the economic status of each spouse, and the needs of the children.  The court will make the determination that best serves the interest of the family.  Until the contradictory hearing occurs, both spouses have equal right to remain in the house.  Once the court issues an order stating who needs to vacate the house, the couple must abide by the order.  At the time of the order, the court will decide whether or not to award rental reimbursement to the spouse who must leave the home.  The court will also determine the amount of the rental reimbursement at that time.  The spouse who remains in the house and pays the mortgage in full, will be entitled to a mortgage reimbursement claim.

MORTGAGE REIMBURSEMENT

A claim for mortgage reimbursement is made in efforts to grant the spouse who remained in the marital residence one half of the amount paid on the mortgage from the time of the order until the partition of the property.  The amount will be for one half of the mortgage payments since the payments are made on the martial residence, which is community property.

RENTAL REIMBURSEMENT

A claim for rental reimbursement is made in efforts to grant the spouse who vacated the marital residence one half of the fair market value of rent from the time of the order until the partition of the property.  In essence, the mortgage reimbursement claim from the spouse that remains in the home, and the rental reimbursement claim from the spouse that vacates the home, often come close to balancing out.

VALUATION

Unless the spouses can agree on the values, the court will assign monetary value to each piece of property.  This is generally done by obtaining appraisals for real property, vehicles, or art.  Sometimes a financial professional will be necessary to determine the values of retirement assets or investments.  It is important to note that often the value of property is significantly less than what the item was purchased for; think “garage sale prices”.

DATE OF VALUATION

The date of valuation is the set date that values will be given to all property.  A date of valuation is necessary since the values of property often fluctuate.  For example, the house that you and your spouse own was worth $150,000 in 2015, but is now worth $170,000.  Due to the real estate market the value of your house increased, and you want to be sure to calculate this into the partition of your property.  If the parties cannot agree on a date of valuation, the court will set one.  The date of the divorce petition or divorce trial are commonly used as valuation dates.

DETERIORATION

During a divorce proceeding, the situation often arises in which community property is under the control of one spouse.  The spouse who is in control of the community property has a duty to preserve the community property.  This means that the spouse in control of the community property will be answerable for any damage caused by his fault, default, or neglect.

HIDING ASSETS

During a divorce proceeding, the situation often arises in which community property is under the control of one spouse.  A spouse may not alienate, encumber, or lease former community property (or his interest in that property) without the approval of that other spouse, except as allowed by law.  The law allows a spouse to alienate, encumber, or lease movable property that is issued or registered in his name.  The law also allows a spouse who is the sole manager of a former community enterprise to alienate, encumber or lease moveable property in the regular course of business.

REIMBURSEMENT

If community property was used during the matrimonial regime or after its termination to satisfy a separate obligation of a spouse, the other spouse is entitled to reimbursement for half of the value of the community property used.  For example, if the husband uses community funds to purchase a $2,000 television, the wife would be entitled to one half, or $1,000.  Another example is if the husband purchases a $150,000 with $100,000 of separate funds and $50,000 of community funds, the wife would be entitled to $25,000 (one half of the community funds).

PETS

In Louisiana, pets are considered property.  The spouses should try and come to an agreement about who will keep any pets acquired during the marriage.  However, if the spouses are unable to agree, the court will award custody to one of the spouses after considering who legally owns the pet, and who can better care for the pet.

ENGAGEMENT RING

Since an engagement ring is generally given to the spouse prior to marriage, it is considered a gift and therefore separate property.  Should you wish to keep your engagement ring, it is likely that you will be able to keep it.

INHERITANCES

In Louisiana, inheritances and gifts are considered separate property even if they are acquired during the marriage.  Since there is a presumption in Louisiana that all property acquired during the marriage is community, you would need to rebut that presumption during trial.  This can be most easily done if you:

  • Kept the property completely separate from community property and did not comingle assets;
  • Have the property titled solely in your name;
  • Kept record of how the property was acquired.

Consult with your attorney to ensure that your inheritances and gifts remain yours after your divorce.

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