Dividing property in New Mexico is done according to the state’s community property laws. This means that each of the spouses has a one-half interest in all of the property acquired during their marriage. It is presumed that all property acquired during the marriage is community property, unless proven otherwise. Understanding what property you and your spouse own and how that property shall be divided, is important to determine prior to creating a marital settlement agreement.
Community property is divided equally by the court, so that each party receives a share of the property that is equal to what was awarded to the other party. The particular items of property do not necessarily have to be divided, as long as the overall division is equal. For example, if a couple has three certificates of deposit, one worth $5,000, and two worth $2,500 each, the court would award the $5,000 certificate to one spouse, and the two $2,500 certificates to the other.
Division of community property sounds like it should be a simple matter. As a general rule, it is, but there still are important areas where disputes can arise. The most important area of dispute is the decision of what property is community property. As noted above, it is presumed that property acquired during the marriage is community property. If a couple buys a house while they are married, the house is community property. This is true even if all of the funds for the purchase were earned solely by one spouse during the marriage. Property that one spouse owned before the marriage may be considered separate property. Similarly, property that was acquired by one spouse through gifts or inheritances will usually be regarded as separate property.
The disputes arise when property is “blended.” Suppose a woman owns a portfolio of stocks. After she marries, that stock remains her separate property. If she marries, and she and her spouse buy a house after the marriage, the house is presumed to be community property, since it was purchased after the marriage. Suppose however, that the money for the down-payment on the house was the money received when the first spouse sold her stock portfolio. How is that contribution treated in a divorce?
The cash contribution will very likely be held to be community property. When the money was applied to the down-payment, it will appear as though the spouse wanted to make a gift of the money to her spouse and herself as a married couple. The cash has been comingled or transmuted, and is now community property.
The key factor here is intent, or evidence of intent. When the stock was sold and the proceeds used to buy a house, it looks like the intent was to make a gift to both of the spouses. If, instead of it towards the down payment, the money had been reinvested in a mutual fund in the name of the spouse who owned the stock only, it is likely that the mutual fund investment would remain separate property.
While we have been discussing dividing assets, remember that liabilities are also divided equally. Debts of a married couple will be split up in a similar manner. If a spouse owed money on a credit card before the marriage, and didn’t add to it while married, that debt stays with that spouse. Unpaid debts acquired during the marriage are split.
All types of property—real estate, bank accounts, vehicles, vested retirement plans, interest in a business—may be community property, and subject to division. Once it is determined what property is community property and which is separate property, the courts will assign a value to the community property.
If you cannot agree on values and do not have the financial resources to hire a valuation expert, the court will likely order all property be sold and the cash received from the sale be divided. This is because cash may be easily divided between you and your spouse.
If you have any questions about dividing property, we encourage you to consult a lawyer to better understand your obligations.