Contact Our Firm for a Consultation

TV appearances

news article

Are assets acquired during a separation deemed marital property?

Are assets acquired during a separation deemed marital property?

The short answer is possibly. Any vehicles, houses, money, or general assets you or your spouse acquires after a full separation might not be separate property in the court’s eyes. The outcome depends whether you’re divorcing in a state that recognizes legal separation and isn’t a community/communal property state.

Marital or Separate Assets?

How the court defines marital and separate property, which covers assets and physical property in addition to real estate, is a good place to start. State law might not dictate what a judge will deem as marital or separate assets. Consult past cases or speak with a divorce attorney to learn more about local laws.

What is Marital Property?

• Joint bank accounts
• Homes where you both have lived, regardless of deed/title
• Vehicles acquired during the course of marriage and, in select cases, separation.
• Purchases made with marital money, including investments.
• Money from the sale of community property
• Contributions to investments during the course of the marriage and separation.
• Businesses, including profits gained

Marital property is anything and everything received during the length of your marriage and, in most cases, your separation. It includes gifts where both spouses are the recipient, including money or property. Be sure to reference your state laws.

What is Separate Property?

This mostly comprises of assets acquired before the marriage and up to the divorce (or legally recognized separation with defined asset division). It includes inheritance you or your spouse might receive before, after, and during a marriage where only one of you is named. Personal injury judgments and gifts you or your spouse receives before, during, or after the marriage are separate property too. Personal bank accounts opened before or after separation might be considered separate property in part or full.

What Constitutes a Legal Separation?

Only 42 states recognize separation and/or have a legal process to assist couples looking to protect themselves prior to a divorce proceeding. Of these states, each has its own laws, rules, and definitions for what it constitutes as a legally binding agreement to separate.

Many states also have laws regarding the length of a separation—including legal asset dispersion—before divorce proceedings begin. Both you and your spouse can enter a legally binding contract that defines and outlines the length of separation and what happens to assets gained between separation and divorce. Once you’ve both agreed to the terms, you file it with the family court. In some states, such as South Carolina, this step is required for no-fault divorce.

States Recognizing Legal Separation

• Alabama
• Arkansas
• Arizona
• California
• Colorado
• Connecticut
• District of Columbia
• Hawaii
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Utah
• Vermont
• Virginia
• West Virginia
• Wisconsin
• Wyoming

Community Property States

If you reside in a community property state, all assets up until a finalized divorce are marital property and therefore subject to a 50/50 split outlined in the Uniform Marital Property Act. This will include any money, property, or investment gains either spouse obtains during separation—even if the state recognizes legal separation—unless you’ve reached and signed a legally binding contract stating otherwise. If you already have a pre or post-nuptial agreement, make sure it’s recognized in the state you file.

States with Community Property

• Arizona
• California
• Idaho
• New Mexico
• Nevada
• Texas
• Washington
• Wisconsin

Assets gained by either spouse while residing in a community property state can affect the division of those assets, regardless of where separation or divorce occurs. This is primarily seen with investments, vehicles, and real estate purchased with community funds.

What do Courts Consider Community Property?

Community property is a rather broad term that will constitute anything the court can’t deem as separate property. When people think of assets, they generally consider the bigger items such as houses, cars, and furniture. However, community property does include investments, including retirement funds like 401K that were contributed to during the marriage and separation. Unless specified in a separation agreement, these types of investments might be community property.

Any time you or your spouse use communal funds to make a purchase or investment during separation, the purchase becomes communal property. For example, if a spouse cashes out their 401K and buys a house, the house is communal property and the other spouse is entitled to half under the Uniform Marital Property Act.

What about Pre and Postnuptial Agreements?

Even when a pre or post-nuptial agreement is reached, a judge can still determine an asset as marital or community property. In 2010-2011 divorce proceedings Frank McCourt and his wife, Jamie McCourt, a California Judge ruled that his MLB team ownership fell under community property, even though the couple had a prior marital agreement.

Whether your newly acquired assets (or your spouse’s) are protected during a separation and divorce depends on where you reside and the state laws. If possible, reach an agreement with your spouse regarding gained assets during your separation as soon as possible, notarize it, and file it with the family court. This crucial step can protect you until your divorce is final.