Define Marital Property

couple negotiating settlement

Generally speaking, marital property is any property acquired by you and your spouse while you're are married. The division of marital property can become a serious point of contention during divorce. Most states equitably divide marital assets, which depending on the circumstances, can be a very complicated process.

Marital Vs. Non-Marital Property

One of the first steps divorcing spouses should take is to sit down and create independent lists of what they believe to be marital and non-marital property.

Marital Property

Property acquired by a couple after marriage is considered to be marital property. Marital property is subject to division when parties divorce. There are two way to divide marital property- community division or equitable division. Each state will have its own laws regarding division. Community division or community marital property is where each spouse will each get one-half of all marital property. In an equitable division state, marital property is divided according to a set of equitable division factors.

Non-Marital Property

Property that falls within the following categories is deemed non-marital property:

  • Property that was purchased before the parties married
  • Property received as a gift from one spouse to the other
  • Property received as an inheritance
  • Property acquired after a Judgment of Legal Separation or after parties begin living separate and apart (in some states)

In addition, couples can always agree that certain property obtained during the marriage be excluded from the marital property classification. Since this decision can have a huge impact on your future legal rights, it is wise for both spouses to seek independent legal advice. Make sure you are clear on the legal consequences of exclusion. You may want to ask for compensation of some type in return for giving up your rights to the future value of your portion of this particular item of marital property.

Date of Separation

The date a party separates has huge implications on whether or not property is defines as a marital or non-marital. A person who is thinking of ending their marriage may choose to hold off buying property until after they have met the legal requirements for separation in their state, so the new property is not considered a marital asset. If parties cannot agree on a date of separation, the court will make the decision of the date based on evidence presented by parties at trial.

Common Issues When Dividing Marital Property

The apportionment of marital property is an issue that can send a divorce from agreement to trial. The process of dividing marital property is more complicated when you live in a state that adheres to the principle of equitable division.

Equitable Division

Unlike community division, which is a simple fifty-fifty split, equitable division of property is based on a set of factors that can vary a bit from state to state, and can include the parties' financial statuses before marriage or whether one party is at fault for the divorce. An equitable division of property is meant to be a fair division. This could mean that marital property is split in half, or that one party receives more than the other does. The couple, with the help of their attorneys, may be able to reach an agreement on how to split assets. If they are unable to work things out among themselves, they will have to go to trial. In trial, the judge will decide all of the issues the parties could not agree to.

Valuation of Marital Property

Whether the decision about how to divide marital property is being made through negotiation or by a judge, the value of the marital property will need to be determined. Lawyers for the couple may need to order appraisals or valuations of the following to do so:

  • Business interests
  • Family business interests
  • Investment funds
  • Personal property
  • Professional licenses
  • Real estate
  • Retirement funds
  • Stock options

Once the value of the marital property has been determined, it can be divided in an equitable manner. One person may retain the family home, while the other may continue operating his or her business, for example. There are special rules that apply to retirement funds, and a financial advisor may need to be called in to give advice about how to set up a transfer so that the recipient is not required to pay tax on the amount received at the time.

Dealing with Co-Mingled Assets

There are some situations where trying to define marital property can be difficult. An example of separate property being combined with marital property is where one spouse uses funds from a bank account they had before the date of the marriage (separate property) to buy a home for the couple to live in after the marriage (marital property). Another example of co-mingling marital assets is when one spouse receives inheritance and deposits the money into a joint bank account. If the couple cannot agree about how the situation should be treated in the divorce settlement, then a judge may be asked to rule on this issue.

The best way to avoid co-mingling of separate property with marital assets is to keep both kinds of property completely separate. However, you can also keep detailed records to prove that an asset or portions of banking/investment accounts should be considered separate property when the marriage ends. Unless the couple has been married only a short time or doesn't own property together, the best choice is to consult an attorney for advice.

Diligence Is Crucial

Classifying marital property can be extremely tricky. The best way to ensure that your rights are protected is to seek the advice of an experienced family law attorney that guides you through your divorce.

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Define Marital Property