When a couple gets separated or divorced, they must divide their property by mutual agreement or through a court proceeding. If a court divides the assets, it must first divide them into two categories: shared property and separate property.
Separate property will not be considered in dividing the assets since separate property belongs only to the individual spouse, not the couple. Shared property will be classified as belonging to both spouses, and the court will decide its future owner, which will typically divide the property in half. Bank accounts and such are easily divided in half.
In the case of such items as real estate, the court will either order the parties to sell the property and split the proceeds, or one of the spouses can buy up the other one’s share.
What Type of Property is Commonly Referred to as Separate Property?
Classifications of property in a divorce context will depend on state laws. However, generally speaking, the following are the most common forms of separate property:
- Property acquired before the marriage began
- Inheritances and gifts (such as property received through a will or gifts made before the parties were married)
- Heirlooms (usually valuable items kept in the family, such as jewelry)
- Property used wholly or principally for business purposes
- Property acquired under a trust
- Property that the partners declare by agreement to be separate property
- Property obtained with the proceeds of separate property that is sold and was not intended for the use or benefit of both partners
- Property acquired when the couple was separated or living apart. Generally, spouses are regarded by the law as living separately and apart when one clearly informs the other that they do not wish for the marriage to continue.
- To be considered living separately and apart, the spouses should also reside in different homes.
Perhaps the most clearly defined pieces of separate property are those items declared separate property through an agreement between the parties. Thus, if there are any specific property items or assets the parties don’t want to be classified as shared property, they should write an agreement and list the property as separate. This is typically done through a legal document such as a prenuptial agreement.
For separate property to remain separate, it is important to remember that you must treat the property as separate property. If you declare a home you owned before marriage as separate property and rent it out and receive income that you declare to be separate, do not commingle that income with shared income. Keep it separate, or it will lose its identity as separate property.
For example, the wife owned a home before marriage, and the husband verbally agreed that the house and all assets related to the house belonged to her alone. The wife rents out the home and generates rental income. She even puts the rental income in a separate account.
However, the husband has access to the account. While he may not withdraw money from it, they sometimes use it to fix broken items around their shared home. The wife even used money from the rental income to take them on a joint vacation and pay bills.
Her behavior might persuade the court that the rental income assets have not been kept sufficiently separate. Even though she and her husband agreed that the home was hers before they married and would remain hers during the marriage, she runs the risk of having it be considered shared property. She made five mistakes:
- She did not get the agreement with her husband in writing
- She gave her husband access to the account
- She used some of the money to fix up their shared property (the home)
- She used some of the money to take both spouses on a joint vacation
- She used some of the money to pay joint bills.
To avoid this result, she should have spent the money only on (a) things for herself or (b) things for the separate home. She also should not have given her husband access to the account.
What Property is Commonly Classified as Shared Property?
The following are the most common forms of shared property in a divorce:
- The marital home, especially if it is registered in the name of both spouses
- Family property, which includes items such as furniture, fittings, household equipment and appliances, vehicles, and boats, even if they are in one person’s name or were purchased by only one spouse
- Any common or jointly-owned property
- Property acquired before the marriage relationship began, if it was intended for the couple’s common use or benefit
- All income earned during the marriage
- Property bought after the marriage began
- The value added during the marriage relationship to superannuation and life insurance policies.
As can be seen, the timeline of the marriage is a major factor when determining whether to classify property as shared or separate. In most instances, property acquired during the marriage is considered shared property. Property acquired before the marriage is usually classified as separate property if kept separate during the marriage. There may be exceptions to these guidelines based on state laws.
Do Marital Property Laws Differ by State?
Yes. States are generally classified into two different types depending on what types of marital property laws they follow. Some states follow what is called “community property” law. Nine states follow community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community property is defined as all property and money acquired by the couple when they were married. When spouses get divorced, community property is divided equally.
Property that is not community property (that is, separate property) belongs to the spouse who acquired it. Separate property is defined in a community property state much as in a non-community state.
In non-community property states, courts will divide property in a plan of “equitable distribution.”. Under these laws, the property may be divided in a case-by-case manner according to what the court determines to be “fair” or “equitable.” This can be determined through an examination of various factors, including:
- How long the marriage arrangement lasted
- Whether any specific property agreements between the spouses might affect the property distribution (such as a prenuptial or postnuptial agreement)
- The financial condition of each individual spouse at the time they entered the marriage
- The overall character and disposition of each person’s estate
Thus, property division for a divorce in an equitable distribution state might not follow an exact 50/50 split or division of the property. However, this is usually considered acceptable, as the court will seek to arrive at a division of property that is considered most fair.
Should I Contact an Attorney if I Need Help with Separate and Shared Marriage Property Issues?
If you are going through a divorce and are in a dispute over the division of property, you may find the advice of a divorce lawyer to be extremely helpful. Due to the complicated nature of divorce proceedings, the counsel of an attorney who handles these kinds of disputes can be beneficial.
They can help provide legal advice according to the state’s specific laws where the divorce occurs. They are also quite useful for negotiating with your spouse, as unlike you and your spouse, they do not have an emotional investment in the case.
