Building a life with someone often means sharing love, memories, and a lot of things. So when a couple decides to part ways, it’s never an easy decision. In most cases, it involves the tedious process of dividing property that was accumulated in the course of the marriage.
When it comes to divorce, every state has its own laws. Where you live affects how assets and debts will be handled upon divorce. In addition to understanding the difference between separate and marital property in a community property state, you have to recognize your state’s divorce laws.
In all these states, all assets and debts acquired during the marriage are owned jointly regardless of the name on the paperwork.
If you live in a community property state, it is extremely crucial to understand separate and marital (community) property. Both classifications are of property acquired during the marriage, but ownership is different.
Marital property is property acquired, obtained, or earned during the marriage, including income, retirement earnings, physical property, and joint accounts.
Separate property is a property that you and your spouse own individually and was never shared. Properties that can make it into this list include inherited property, property acquired after the date of legal separation or divorce, or assets acquired before the two of you got married.
One way most spouses protect their separate property is through prenuptial agreements. However, it can sometimes become a killjoy to the relationship. So what other options do you have if you want to keep your assets and money separate while still married? Here are some tips.
“Comingling” is often viewed as “gambling losses” to one spouse, and “lottery winnings” to the other. If you mix funds that you owned before the marriage with your earnings or joint funds, then start counting your losses. The entire account will automatically become marital/community property and that divorce may ruin you financially.
The courts will not try to figure out what type of dollar went into the marital account. Keep all your premarital or inherited property totally separate during your marriage to avoid this financial hassle.
If you already have your own home before getting married in a community property state, avoid putting your spouse’s name on the title. Many people do this but later lose that house after divorce. While you could argue that you only did that for estate planning purposes, the family courts almost always never accept such an argument. If you’re not prepared to give half of what you own to your spouse in a divorce, don’t add their name to your bank accounts or deed.
It’s easy to keep your premarital financial accounts and deeds separate. However, there’s a problem when it comes to maintaining that premarital property.
In most cases, one or both spouses will use their paychecks to pay the property’s debts or make improvements to that property. In such cases, the courts will be tasked with the duty of figuring out what percentage of this property is marital and what part has largely remained non-marital.
For everyone’s sake, maintain the premarital property using funds from your inherited or premarital account.
If you want to maintain a seamless and pain-free process, consider these:
Mostly this is easier said than done. But your process is likely to be smooth and quick if you are able to come to a settlement agreement on your own without involving the family courts. Even in negotiations on property division, each of you needs to hire legal representatives to offer you guidance, mediate and ensure you get a fair deal.
Start the process of marital property division by listing every property you have acquired during the marriage.
Here, the separate property doesn’t count.
If you have some money stashed in a personal account, now is not the time to hide it. Divorce attorneys are excellent at digging out assets that a spouse purposely hid out of sight. You may ruin your negotiations if this is discovered.
Your state’s property ownership laws will be the final determinant even if you bring any drama to the court. The role of the judge is to remain impartial and remain true to what your state says about property division. For your own survival, make sure to have your emotions in check before you go to court since the marital property will be divided based on your state’s laws and not based on your wishes.
Remember to talk to a divorce property lawyer to learn which laws are specific to your state. When it comes to the division of property, geography is critical. Regardless of your residential address, it is vital to get the guidance of a divorce team that will help you through your individual case.
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