Separate Property Laws

In a divorce, “separate property” is any property that was acquired by a spouse before the marriage took place. It is generally property acquired by purchase, gift, or inheritance. However, the main characteristic is that it was intended to be owned only by one spouse rather than jointly by both spouses. Examples of separate property might be a car, furniture, or other items of personal property that one spouse buys before they get married.

Real property can be separated as well. One spouse might have bought a house before they got married, or they may own a house that they received in the dissolution of a prior marriage.

Separate property also includes property that has been specifically identified as separate property in a contract, e.g., a prenuptial agreement, postnuptial agreement, or other types of legal documents such as a title to property.

Also, in all states, property that a spouse acquires during marriage by inheritance is their separate property even though they acquire it when they are married. This is true if the property is kept strictly separate during the marriage. If it is, then the property is likely to be considered separate if the spouses dissolve their marriage.

Likewise, gifts given to a married person by a third party when they are married are separate property of the recipient of the gift. So, if a married person’s great aunt gives them a valuable piece of heirloom jewelry as a birthday gift when they are married, it is still the person’s separate property.

In contrast, marital property, which may be referred to as “community property” or “shared property,” depending on the terminology in use in a particular state, is property that a married couple acquires during their marriage and is owned jointly by the spouses. For example, if a married couple buys a house with money they both earned during the marriage, the house is their marital, community, or shared property. They both own an undivided interest in the property.

It is important to keep in mind that how property is characterized in a marriage and in the case of divorce is a matter of state law. In the U.S., most states have one of two regimes of marital property. A state is either a community property state or it is a common law property state.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are all community property states. These nine states follow the rule that all assets acquired during a marriage are considered community property, that is, the property of both spouses.

The states of Tennessee, South Dakota, Alaska, and the Commonwealth of Puerto Rico have adopted elective community property laws, along with Alaska and the Commonwealth of Puerto Rico. Three states do not fit neatly into either of the categories of community property or common law regimes.

For example, Alaska adopted an elective community property system but is still effectively a common law state. However, a spouse may still have a right to keep an inheritance as separate property if they sign a written agreement with their spouse. Another option they have is to create a community property trust with their spouse.

In Tennessee and Kentucky, both residents and nonresidents may create community property in those states through a community property trust.

What Happens to Separate Property in a Divorce Proceeding?

In the event of a divorce, what happens to separate property depends on the law of the state in which the divorce takes place and the facts in any given situation. Generally, separate property is treated differently than community property or marital property.

After a divorce becomes final, property that is characterized as separate is kept by the spouse who acquired it before the marriage or by purchase or gift or through inheritance during the marriage. Additionally, the spouse who is awarded the separate property does not have to compensate the other spouse for any interest in the property. This is because the spouse does not have any interest in it.

Thus, for example, if one party individually owned a home before the marriage, this property is generally classified as separate property. The spouse who owned the home prior to the marriage keeps full title to the home after the couple divorces.

Again, community or marital property is subject to the divorce laws specific to each state. In community property states, community property is owned equally by the spouses, and it must be divided equally between them. In common law states as well, shared marital property is divided between the spouses. The division is made in a way that is considered equitable.

Therefore, it is important that the parties be very clear about which property is classified as separate property and which property is considered to be community or marital property. One good way to do this is to have a prenuptial or postnuptial agreement.

The spouses may fail to agree on the characterization of the property they have. If this is the case, they would raise the issue in their divorce pleadings, and the court would have to have a hearing or trial and decide the issue.

Are There Any Exceptions to Separate Property Laws?

There are a few exceptions to the laws that govern separate property in a divorce. These may include:

• Specific instructions: If the spouse who owns an item of property has made specific instructions about the property in a valid contract or a will, they may be able to change separate property into shared property and vice versa. This may depend upon the consent of the other spouse;
• Property improvements: If a spouse has contributed improvements to the separate property of the other spouse, it might actually reclassify the property as shared or community property. The other spouse may be entitled to a share of the property, usually in an amount equal to the value of the improvement.

Conversely, in a community property state, if separate property is converted to community property, then both spouses may be considered to own equal shares, as is the case with all community property.

Suppose one spouse owns a car that they purchased before getting married. In the course of the marriage, the couple treats the car as a shared asset, with both using it freely. They may even add both their names to the title. By the time the couple gets divorced, a court may view the property as community or marital property.

Can I Change Separate Property into Community Property?

Again, whether and how separate property can be changed into community property or marital property depends on the law of the state in which the divorce takes place. In almost all states, there are a limited number of exceptions to the characterization of property as separate.

As noted above, separate property may be changed into community or marital property by specific instructions in a valid, written document. Or the change may be achieved if one spouse invests in improvement to separate property.

Also, couples can make contracts, prenuptial and postnuptial agreements, that are legally enforceable. They may do this before or after marriage. They may specify the character of property the couple has and how assets are to be divided in the event of a divorce.

Do I Need a Lawyer for Help With Separate Property Laws?

In any divorce proceeding, the division of property between the parties is one of the main issues of concern. If you are thinking about divorce and believe that there may be disputes about the character of the property you have, you want to consult an experienced family lawyer.

LegalMatch.com can connect you to a family lawyer who can represent you in your divorce and help resolve property issues in a way that is fair to you. Your lawyer can help with the classification of properties to determine which property you will be entitled to keep after your divorce.