Separate vs. Marital Assets Under Property Division Law
Before assets are divided in a divorce, spouses must determine whether property is separate or marital. Marital property will be divided during the divorce process in accordance with the state’s division system. Separate property, on the other hand, may be protected from division and wholly awarded to the spouse who owns it.
Marital property is generally any asset or debt accumulated by the couple during the marriage. Paychecks earned during the marriage are an example of marital property, as are most debts incurred in marriage. Marital property may also include real estate, businesses, investments, employment benefits, and other assets.
If divorcing spouses do not agree on whether an asset is marital property, the court may consider other evidence. In most states, both spouses’ names on the title of the property, such as a house or a car, will be evidence that the property is marital. For example, a husband who owns a home before marriage and subsequently changes the title to the house to include his wife after marriage may be seen to have gifted the property to the marriage, making it marital property.
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Separate property may evolve into marital property under some circumstances. In some states, spouses may agree in writing that a separate asset will become marital property, but most states will consider property marital property if facts suggest that the property was being treated as such. For example, a house owned by one spouse before the marriage may become marital property if both spouses make mortgage payments. Mixing marital and separate property is called “commingling.”
Assets can also be a mix of marital and separate property. For example, spouses who spend a significant amount of time working on one spouse’s business together may turn at least part of the value of the business into marital property. If an asset is partially marital property and partially separate property, the party who owns the separate portion may be able to buy out or compensate the other for their share of the marital portion. That way, the party who owns the separate property will not need to sell it or alter it to divide it with their spouse.
Separate property is property owned by only one spouse. This is usually property that was acquired by that spouse before the marriage or after separation (or divorce in some states). Separate property may also be property that one spouse inherited or was gifted individually during the marriage. Awards or settlements from certain civil lawsuits may be separate property if they are for the purpose of compensating only one spouse (such as an award for pain and suffering). In some states, spouses may make property separate by agreement.
A spouse may need to introduce evidence to prove that an asset is separate property.
If divorcing spouses disagree about whether an asset is separate or marital property, a judge may look at other evidence. The analysis and weight of the evidence may differ depending on the state. For example, in many community property states, a sole spouse’s name on the title of an asset will not be evidence that the property is separate. However, this evidence may be persuasive in an equitable distribution state. It is highly unlikely that income earned during the marriage would be separate property, but if the income was kept separate from all other marital funds and only used for personal, separate expenses, it might be considered separate property.
If separate and marital property have become commingled, a spouse may be able to prove that at least some of the asset remains separate property by carefully tracing its acquisition back to separate funds. However, the spouse may have no choice but to settle for a buyout or other offset to compensate them for their separate property, rather than acquiring the property itself.
Determining whether property is separate or marital can become a very fact-specific inquiry. Especially in community property states, a judge may presume that all the property in a couple’s possession during their marriage is marital property unless they present evidence to suggest that an asset is separate property. Divorcing spouses looking to preserve certain property as separate property should do their best to acquire any evidence, such as legal documents, receipts, and bank statements, that helps support their position.