Divorce has the potential to be financially devastating. People who end their marriages often pay thousands in court costs. They also have to divide their marital or community property. Under state statutes, there is a presumption that spouses should evenly split their marital resources with one another.
Even when one spouse worked and the other stayed home, any income earned during the marriage and assets acquired with that income could be at risk of division during divorce. However, the state does recognize that some assets remain the separate property of one spouse. Such assets generally do not have to be divided at the end of a marriage.
What property is considered separate in a divorce?
Gifts and inheritances
Other people can give spouses items of significant value. Friends and family members can gift people vehicles, furniture, jewelry and other meaningful items. If a family member of either spouse dies, they might receive an inheritance during the marriage. Both gifts and inherited assets are typically separate property in the event of a divorce.
Assets from before the marriage
People often wait until after they have finished their degrees or have begun their careers to get married. They may have already purchased a home, set aside thousands in retirement savings or started the small business.
Assets acquired before the marriage typically remain the separate property of the spouse who owned those items. The state also allows people to designate any assets acquired after they petition for divorce as separate property.
In some cases, separate property can be vulnerable during divorce if spouses commingle their assets. Commingling involves maintaining separate property with marital income, giving spouses an ownership interest in those assets or allowing spouses to perform uncompensated work to improve or maintain separate property. Adding a spouse to the deed of a home owned before marriage gives them an interest in the property if the spouses divorce, for example.
Identifying separate property and establishing whether commingling occurred can help people prepare for an upcoming divorce. A thorough financial review may help people establish a nest egg that may allow for a more comfortable standard of living after the divorce.