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Alabama Property Division
Property Distribution Laws in Alabama

In Alabama, the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the Circuit Court divides the marital estate within the Judgment of Divorce.

Alabama is an equitable distribution state. Equitable does not mean equal, or even half, but rather what the Circuit Court considers fair.

The court divides the marital property based upon the facts and circumstances of each individual case. The trial court judge enjoys great latitude when dividing and distributing marital property.

In dividing the property, the court first categorizes property as marital or separate assets, assigns a monetary value for each piece of property, and then distributes the property between the spouses.

Factors in Equitable Distribution

According to the Code of Alabama, Title 30, in dividing property, Alabama judges consider:

  • the length of the marriage
  • any prior marriage of either party
  • the age, health, station, income, vocational skills, employability, estates, liabilities and needs of each party
  • the contribution by one party to the education, training or increased earning power of the other party
  • the opportunity of the parties to acquire future income and assets
  • sources of income, including medical, retirement, insurance or other benefits
  • the services of each party as a parent, wage earner or homemaker
  • the value of the property set apart to each party
  • the standard of living the parties established during the marriage
  • the tax consequences of the distribution
  • with whom the children will reside the majority of the time

However, Alabama is one of eight jurisdictions that include separate property in the marital estate “providing the court finds a special showing of need by the non-titled spouse.”

In dividing property, the courts may also consider marital misconduct.

Marital Property vs. Separate Property

Property acquired from the date of the marriage through the date of separation is marital property and subject to distribution. Property each spouse owned before the marriage, or acquired during the marriage by gift or inheritance, is separate. Gifts and inheritances used to benefit both spouses as a married couple become marital property. Separate property that is commingled with marital property becomes marital. Untainted separate property obtained before or during the marriage remains immune from distribution. The separate property includes, but is not limited to, gifts and inheritances.

In order to establish an asset as separate property, it must remain under the control of the spouse claiming it. Property combined with joint property for the benefit of both spouses becomes marital. In Alabama, the appreciation in the value of separate property remains separate property.

Property Defined

In Alabama, marital and separate property means not only the obvious assets the couple owns such as “houses, automobiles, jewelry, clothes, bank accounts, and property,” but also includes “pensions and retirement accounts, investments, cash value of life insurance policies, family owned businesses, tax refunds, tax credits, [and] trademarks.”

Joint checking/savings accounts, separate money deposited in a joint checking/savings account, jointly owned real estate, gifts from one spouse to the other – all are marital. Property held immune - “untainted” as it is sometimes called - from commingling remains separate. This includes separate checking/savings accounts opened before the marriage, stock owned before the marriage; individual inheritances, and any property classified as separate under a prenuptial agreement of the parties.

Valuing Property

Depending upon the asset and the agreement of the spouses, different methods of valuation are used to determine the value of a marital asset. When the spouses agree, courts generally accept what they say about the value of an asset. Absent an agreement, experts may be retained by the parties or by the courts to determine the value of marital assets. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.

The Marital Home

In Alabama, as in many jurisdictions, the equity of the marital home is often one of the biggest marital assets. The equity is the market value of the house, less any liabilities against the property, such as a mortgage, taxes, home equity loans. Normally, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.

From there, couples choose one of three options to divide the equity:

  • The spouses sell the home and divide the proceeds.
  • One of the parties may refinance the home and “buy out” the other party.
  • One spouse (usually the custodial parent) remains in the home with the exclusive use and possession for a certain period of time (for example, until the youngest child graduates from high school), then either buys out the other spouse or sells the home and divides the proceeds.

Pensions and Retirement Accounts

In Alabama, the court may include the retirement benefits and plans earned by both spouses as marital assets available for division.

Retirement benefits vary greatly but can generally be divided into two groups:

  • Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)’s, 403(b)’s and profit sharing plans fall into this category.
  • Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employee’s salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.

Alabama statute places several limitations on the inclusion of retirement benefits as divisible marital assets. These conditions include provisions that:

  • the spouse owning the benefits must be vested in them or be receiving them on the date the divorce is filed
  • the parties must have been married for ten years, during which the benefits were being accumulated
  • any retirement benefits earned prior to the marriage must be excluded
  • the total benefit extended to the non-covered spouse must not exceed half the benefit to be considered
  • the payout to the non-covered spouse may not begin until the covered spouse begins receiving benefits or reaches age 65, whichever comes first.

In Alabama, if spouses share in each other’s retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, how such benefits should be paid, etc.

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