Ever wondered what happens when a property gets taken by the government and you and your ex-spouse both own it? The process of divorced owners award division can feel confusing and stressful, especially if you’re not sure what you’re owed or how taxes work. In this guide, you’ll learn how ex-spouses typically split an award, what legal and tax issues to watch out for, and what steps to take to protect your share.

What Is an Award in a Property Taking?

When the government takes private property for public use, it’s called eminent domain. If you and your ex-spouse co-own the property, you’ll both be entitled to a share of the condemnation award, the payment made as compensation. An award is usually based on the current market value of the property, not what you originally paid. For example, if you and your ex owned a house together and the city needs it to build a new road, you’d receive a payment that reflects the property’s value at the time it was taken.

This payment is meant to make you whole for the loss of the property. But the real question for divorced owners is: How do you actually split this money? That’s where your divorce agreement, property records, and sometimes the courts come in.

How Divorce Impacts Award Division

If you were divorced before the property was taken, your divorce agreement plays a big role. Most settlement agreements or divorce decrees will spell out exactly how any property or future payments should be divided. Some are very specific, saying who gets what if the property is sold or taken. Others are vague or silent about unexpected things like condemnation awards.

If your paperwork is clear, you’ll follow that. For instance, your settlement might say you get 60% and your ex gets 40% of any proceeds from the property, no matter how the money comes in. But if your divorce agreement doesn’t mention condemnation awards at all, then state law will decide. This can get complicated, especially if the divorce happened a long time ago or if the property has changed hands since then.

What If the Divorce Wasn’t Final?

If the property was taken while you were still married or in the middle of a divorce, things can get a little tricky. In these situations, courts usually treat the award as a marital asset. That means it’s just like any other property you own together, like a car or bank account. Both spouses have rights to their share, and if you can’t agree, a judge will decide based on state law and the facts of your case. Sometimes, the court will divide the award evenly. Other times, it will look at things like who paid the mortgage, who lived in the property, or who invested in improvements.

Say you and your ex were separated, but the divorce wasn’t final when the city took your rental property. The judge might look at your financial contributions or even who managed the property to decide how to split the award.

The Role of Ownership Shares

At the heart of any divorced owners award division is who owned how much. Did each person own half? Was it a different split? If you both owned equal shares, the award is usually divided 50/50. But if your divorce or property agreement gave you 70% and your ex 30%, that’s how the award would be split. Always check the deed and your divorce paperwork to see what your share should be.

Ownership shares can get complicated if there were multiple owners, such as a family member or business partner. Or if one spouse signed over their share but the paperwork wasn’t updated before the property was taken. In these cases, the most recent legal documents usually control who gets what, but you might need a lawyer to help sort it out. For example, if you agreed in your divorce that your ex would get the house but their name was never taken off the deed, both of you might still have a claim. Sorting out these details early can prevent big headaches later on.

Taxes on Divided Awards

Receiving a lump sum from a property taking can affect your taxes. This is where the phrase “divided award taxes” comes in. Generally, you don’t pay regular income tax on the award, but you might have to pay capital gains tax on any profit over what you originally spent on the property. Each ex-spouse is responsible for their share of any taxes due, based on how the award is divided.

Let’s say you bought a house together for $200,000, and it’s taken for $300,000. If you each get half, you might each owe tax on $50,000 of gain (minus allowed expenses). But it’s not always that simple. Sometimes, you can defer taxes if you buy a new property within a set time (called a 1033 exchange). This lets you reinvest the award without paying taxes right away, but the rules are strict.