Divorces tend to have drastic economic implications. Spouses have to pay for legal representation and court costs. They also need to divide their property. They have likely spent their married years sharing their income and acquiring any new assets jointly.
Equitable distribution rules can make the property division process somewhat unpredictable unless spouses reach an agreement with one another or have a pre-existing marital contract to guide the asset distribution process. Thankfully, spouses may be able to protect some of their resources from division during divorce proceedings. If they can show that certain assets are separate property, they are not part of the pool of assets distributed by a judge or subject to negotiations between the spouses.
What types of assets can spouses generally preserve as separate property when they divorce?
Premarital assets
Many people acquire valuable property before they get married. Houses, businesses and investments may potentially remain the separate property of the original owner, so long as they do not commingle those resources with marital property. People may also be able to protect any assets that they acquire after formally separating from their spouses as separate property.
Inheritances and gifts
Assets received from other people are often not subject to division during a divorce. Gifts from siblings, friends and parents may remain the separate property of the spouse who received those gifts.
Inheritances are also typically the separate property of the heir or beneficiary who received assets from an estate. Commingling assets with the marital estate can be a concern in scenarios where people receive valuable gifts or inherit property.
Spouses often need to go over financial records and ownership documents to validate their claims that certain assets are separate property as they prepare for divorce. While the courts may not divide their separate property, judges can consider the value of separate property during litigated equitable distribution proceedings.
Learning more about state divorce statutes can be beneficial for those who believe their marriages are likely to end in the near future. Separate property can serve as a critical nest egg for those worried about rebuilding after a divorce. Spouses often need help identifying and properly protecting their separate property during a divorce, and that’s okay.