One of the most challenging parts of a divorce is the division of assets and debts. Before the couple divides things, it’s vital to establish what assets and debts are marital and which ones qualify as separate property. Understanding the difference between marital and separate property is crucial. These classifications can significantly impact the division of assets and property during the divorce process.
Marital property is equitably shared
Marital property refers to any property the couple acquired together after their relationship was formalized. It includes income, real estate, retirement accounts, bank accounts, or a business. The critical aspect of marital property is that it is subject to equitable division in a divorce. Equitable does not necessarily mean equal, and many factors should considered before dividing between the spouses.
Separate property stays with one spouse
Separate property is any property owned by either party prior to the marriage and any property received during the marriage as a gift, inheritance, or from a will. Separate property also includes property acquired during the marriage from the sale or exchange of separate property and property defined as separate under a premarital (prenuptial) agreement. It remains under the ownership of the individual who possessed it.
Commingling assets are common
An asset, debt or property classification can also change over time, so even property owned solely by one party before marriage can become marital property if marital assets are used to improve it or if it is converted to marital property in some other way. The legal term for when individual assets become marital ones is “Commingling.”
Commingling occurs when separate assets, such as an inheritance or property owned prior to the marriage, are mixed with marital assets. For instance, a home owned by one spouse before the marriage (separate property) that increased significantly in value due to improvements made by both spouses during the marriage could be considered marital property. The same goes for a business. For example, suppose one spouse owned a company prior to the marriage, but the other spouse helped out, or the business flourished after the marriage. In that case, the business may be a marital asset.
It’s best to get legal guidance
Spouses can reach their own property agreements outside of court, but the court will still need to evaluate them. The court generally approves agreements as long as they are in writing and each spouse has had an opportunity to consult with an attorney. It’s always advisable to consult a trusted family law and divorce lawyer to navigate these issues. They can also raise questions neither spouse considered or help them be strategic in dividing and transferring assets to minimize unnecessary expenses.