One of the first questions people ask during divorce is: “What property is actually mine?”
The answer isn’t always as simple as looking at whose name is on an account or who originally purchased an asset. Understanding the difference between marital property and separate property can have a significant impact on how assets are ultimately divided.
What Is Marital Property?
Generally, marital property includes assets acquired during the marriage, regardless of whose name appears on the account or title.
Common examples include:
- Retirement contributions made during the marriage
- Investment and savings accounts accumulated during the marriage
- Real estate purchased during the marriage
- Business interests or other assets acquired while married
What Is Separate Property?
Separate property may include assets owned before the marriage, as well as certain inheritances or gifts received individually during the marriage.
But simply identifying an asset as separate property isn’t always the end of the analysis.
When Separate Property Becomes More Complicated
Suppose you entered the marriage with a $100,000 investment account. During the marriage, additional money was contributed and the investments increased in value.
How much is still separate?
Answering that question may require separate property tracing—reconstructing account activity to determine what portion can still be identified as separate and what portion may be marital.
Similar issues arise when inherited money is deposited into joint accounts, premarital funds are used to purchase a home, or separate and marital money are combined over many years.
Documentation Matters
Bank statements, investment statements, closing documents, tax records, and retirement account records can become extremely important when establishing a separate property claim.
The longer the marriage, the more challenging that documentation can sometimes be to locate. Gathering records early in the divorce process can make a significant difference.
The Bottom Line
Determining marital versus separate property isn’t always as simple as asking when an asset was acquired or whose name is on it.
Contributions, appreciation, transfers, and commingling can all affect the analysis. Careful financial tracing can help identify what happened to an asset over time and provide a clearer picture for settlement negotiations.
Working with a divorce-focused financial professional can help organize the records, trace the movement of assets, and provide the financial analysis needed to make informed decisions.