Learn about separate and marital property in a divorce, and how the state you live in can make all the difference in deciding who gets what.
In a divorce, dividing up property can easily become a major bone of contention. Many couples are surprised that, more often than not, the name on the title to the property doesn't control which spouse gets to keep that asset. Instead, ownership of the spouses' property after the divorce will depend on whether:
the assets are considered one spouse's separate property or the couple's marital property, and
the couple lives in an "equitable distribution" state or a "community property" state.
What Is Marital Property and What Is Separate Property?
Generally, marital property is anything that you or your spouse earned or acquired during your marriage. (In some states that means before you were separated, while in others it means before you were divorced.)
Depending on your state, marital property may include any of the following types of assets, as long as they meet the "when acquired" rule:
your primary home, vacation homes, and all other real property such as business and investment properties
bank accounts, stocks, and bonds
partnership interests and business assets
pensions, profit-sharing plans, stock options, and other retirement and employment benefits
household items like clothing, furniture, jewelry, and art
vehicles, including aircraft and watercraft
life insurance policies, and
lottery winnings (based on a lottery ticket purchased during the marriage, even the winnings were paid out later).
The title to the property isn't always relevant. So, for instance, you might put an asset (including a bank account where you deposit your earnings during your marriage) in your name alone, but that won't disqualify it from being considered marital property.
Separate property belongs only to one spouse. Although there are some differences in state rules, there are some categories of separate property that are pretty much universal. Some of these are:
property that one spouse owned before the marriage
gifts or inheritances that one spouse received, either before or during the marriage
property that the spouses have agreed (in writing) is separate, usually through a legally valid prenuptial or postnuptial agreement, and
the portion of certain personal injury awards meant to compensate for the injured spouse's pain and suffering, as opposed to reimbursement for medical expenses or other financial losses during the marriage.
Can Separate Property Become Marital Property?
Separate property can change into marital property in some circumstances. Usually this happens when separate property has been mixed (or "commingled") with marital property. For example, let's say Spouse A had a $20,000 certificate of deposit before the marriage. Usually that would be considered Spouse A's separate property and wouldn't be part of the property distribution when the couple divorced. But if Spouse A deposited the proceeds of that CD into a joint account with Spouse B during their marriage, the CD funds would no longer be Spouse A's separate property, because they were commingled with joint funds.
Sometimes a portion—but not all—of separate property can become marital property.
You find this most often in situations where a spouse made contributions that increased the value of the other spouse's separate property. For example, say that Spouse A owned a house before getting married and never put Spouse B's name on the title. So far, separate property. But during the marriage, the couple used marital funds to make improvements to the house. Although that's generally not enough to convert the house to marital property, Spouse B might be entitled to some of the increase in the house's value attributable to the improvements.
In many cases where a couple is fighting over property in their divorce, a judge will have to look closely at the specific facts and decide whether the assets are separate or marital property, under that state's rules.
How Is Marital Property Divided in Divorce?
Once it's clear which assets are separate property and which are marital property, the marital property will then be divided between the spouses under their state's laws.
There are basically two different methods states use to divide marital property: under "equitable distribution" or "community property" rules.
Equitable Distribution of Marital Property
The vast majority of states use the rule of equitable distribution. In a nutshell, the judge will divide all of the couple's marital property (and allocate their marital debts) based on the judge's decision as to what is fair to both spouses under the particular facts of each case. Because of this case-by-case approach, it's important to note that "equitable" doesn't necessarily mean equal (a 50-50 split).
Each state has its own guidelines for judges to follow when deciding how to distribute property equitably. Some of the more common factors include:
how long the marriage lasted
each spouse's age and physical and emotional health
any income or property either spouse brought into the marriage