People often decide to get married after falling in love and realizing they have similar values and life goals. But romantic ideals aside, marriage is at its core a merger of two entities into a single unit, with shared assets and liabilities. And just as a business merger results in the commingling of assets, so too does marriage (to a degree).
But the question of who owns what typically is addressed only when a married couple decides to call it quits and go their separate ways. Marital property is that which is subject to division upon divorce, but what is separate property in a divorce?
Marital Property vs. Separate Property: The Basics
To define "separate property" in the context of the divorce process, we also need to cover the meaning of "marital property." Most assets (and debts) acquired during the marriage are considered marital property. They are thus subject to division in divorce. The way marital property is divided depends on the laws of your state. But keep in mind that a handful of states use the community property approach (generally, a 50/50 split).
All other property is considered separate property, which means it belongs to just one of the parties in a marriage. When a couple gets divorced, separate property is not subject to division.
Factors Determining Separate Property
The definition of separate property seems straightforward. The determination of whether an asset is separate property can be complex. The following are some factors commonly considered when identifying separate property:
- Timing: Assets owned by one spouse before the marriage are separate property. However, if these assets are commingled or transmuted into joint assets, the classification of the asset can change.
- Gifts and inheritances: Assets received as gifts or through inheritance often count as separate property. This is regardless of when the assets are acquired. However, if these assets are mixed with marital assets or used for the benefit of the marriage, they may no longer be separate.
- Prenuptial or postnuptial agreements: Couples can enter into legally binding agreements that outline the division of assets in the event of a divorce. Prenuptial agreements are created before the marriage. Postnuptial agreements are entered any time after the marriage begins.
- Commingling of assets: It can be difficult to distinguish ownership when separate property becomes commingled with marital assets. For example, a separate bank account enters hazy territory if it's used to purchase or make payments on the marital home.
If separate property has been so commingled with marital property that it's virtually impossible to identify, it will be considered marital property. It will therefore be subject to division in a divorce. For instance, if a joint account (shared income) is used to pay off a car originally purchased by one spouse before the marriage, the car (or a portion of its value) will be considered marital property.
Assets Considered Separate Property
Separate property belongs to just one individual before, during, and after the marriage. Separate property is sometimes called "individual property." This consists of anything that was acquired before the couple got married, with a few notable exceptions.
Debt also follows these rules. Someone who enters a marriage with a heavy debt load typically will be responsible for that debt after the marriage ends. This includes student loans.
State laws determine what's considered separate property. But state laws are fairly consistent with one another. The following are considered separate property in the context of a marital estate:
- Property or real estate owned by one spouse before the marriage
- Contributions to retirement accounts or IRAs before the marriage
- Gifts or inheritances received by one spouse prior to or during the marriage
- Property acquired by one spouse (in that individual's name only) during the marriage and not used by the other spouse or for the benefit of the marriage (unless it's a community property state)
- Property/debts designated as separate in a legally enforceable contract, such as a prenuptial agreement
- Personal injury awards, minus any compensation for lost wages (unless it's a community property state)
- Any property obtained by one party using their separate property assets (such as inheritance funds) with the clear intention of maintaining the acquired property as separate
Separate Property: Community Property vs. Equitable Distribution States
Understanding the difference between community property states and equitable distribution states is important. It is important to understand how each type of state divides property in divorce. Equitable distribution property states automatically define anything registered in one spouse's name only as separate property. This isn't the case in community property states. An example of a community property state is California. Also on that list is Arizona. In community property states, an express, written agreement is required for a determination of any assets as separate property.
Additionally, equitable division states may take into consideration each spouse's separate property. They will do so when determining how to distribute marital property during a divorce equitably. Since community property states split marital property in half, they don't consider each party's separate property.
How Does Separate Property Affect Property Distribution?
Separate property can have a significant impact on the division of property. Generally, separate property is not subject to property division. Sometimes, complexities arise in the property division. When separate property is mixed with marital property or used for the benefit of the marriage, it's less clear how it should be distributed. This can lead to disputes and arguments over asset division in a divorce case. This can also happen with legal separations, as well.
Separate Property, Child Custody, and Child Support
It's important to note that how child custody determinations are made has limited bearing on how property is separated. There are exceptions where the former may be determined by the latter.
For example, let's say that you and your ex-spouse shared a home that can easily accommodate your four children. But after the separation, the house goes to you. At the same time, your ex-spouse has no way to secure another space that can accommodate your four children. Your former spouse recently lost their job, and they cannot afford a place large enough for the children.
In this case, you might end up spending more time with the children. This can mean that you may enjoy greater parenting time with the children. While the two of you may share legal custody of the children, you might still end up spending more time with the children. The division of property ultimately resulted in your taking the house where the children can comfortably live.
Have More Questions About Separate Property? An Attorney Can Help
Don't let property concerns spoil the romance of your budding marriage. But it's a good idea to know the difference between marital and separate property before things go south. If you're concerned about separate property issues, you should get legal advice from a divorce attorney near you.
This area of family law can be hard to navigate on your own, and property laws vary from state to state. There can also be tax consequences for separate and marital property. A divorce lawyer or family law attorney can provide invaluable help. In cases where there are hidden assets, attorneys can assist, as well. Whatever your unique set of circumstances, a lawyer can help.