Separate Property vs Marital Property
Divorce can be a painful time in ones life and brings up a lot of difficult emotions as well as introduction to laws that previously held no meaning before.
A question that comes up often, “What do you mean (s)he’s entitled to (name a sum of money)?! I inherited that from (name a deceased and cherished relative)!”
That leads me to recognize the need for broader understanding around the topic of Separate Property and Marital Property. Also, the topic of keeping separate property separate may be beneficial as well.
Very basic definition of Marital Property is anything that is earned or acquired during a marriage.
Depending on your state of residence that can include:
- Your primary home, vacation homes, other real property like 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 (clothing, furniture, jewelry, and art)
- Vehicles (including boats and airplanes - yes that does come up)
- Life Insurance policies
- Lottery winnings (based on when the lottery ticket was purchased- regardless of when the benefits are paid)
If you aren’t on a title to a property, that isn’t always relevant.
For example if you open an account in your name only, that doesn’t necessarily stop it from being considered marital property.
- Conversely, the basic definition of Separate Property is that is belongs only to one spouse. There are differences from state to state, but here aresome categories that come up most often:
- 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 agreed (in writing) is separate through a legally valid prenuptial or postnuptial agreement
- 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 loss during the marriage)
Be aware that Separate Property can turn into Marital Property in certain circumstances.
Usually this happens when Separate Property has been commingled (or mixed) with Marital Property. Most often in my experience this happens when an account that is individually titled is changed or moved to an account that is jointly titled.
Be aware there are instances when a portion (not all) of Separate Property becomes Marital Property.
For example:
The value of a property owned before the marriage grows during the marriage (for example one spouse owned a house before marriage, and the value increased during the marriage - the amount of the value grown during the marriage is subject to Marital Property)
A spouse made contributions that increased the value of the other spouses property (for example one spouse owned a house prior to marriage, didn’t change the title, and used marital assets during the marriage to make improvements)
If you are in a scenario where there are questions, it’s a good idea to contact a local attorney familiar with your state and county laws to chat in more detail.
Divorce sucks - you don't have to go through it alone, call me for help on the financial side of the split.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski of Raymond James Branch 3BA and not necessarily those of Raymond James or Raymond James Financial Service.
