If you are now going through a divorce and you have a number of assets to separate, it's important to understand what is marital property and what is separate property. In general, assets earned during the marriage are considered marital property, but there are exceptions when it comes to receiving gifts or inheritances. When you and your spouse are divorcing and there is no prenuptial agreement in place, dividing a significant amount of property can become complex.
Knowing If Your State is an Equitable Distribution or Community Property State
While the majority of the states in the US divide property during a divorce in an equitable distribution manner, there are states that are community property states too. In an equitable distribution state, the marital property is divided in a way that is deemed fair. In a community property state, all marital assets are divided in half. How property is divided in an equitable distribution state depends on a number of factors, including the earning power of each individual at the time of the divorce.
Separate Property is Not Distributed During a Divorce
If you had money in a retirement account prior to your marriage, or if you received an inheritance that you didn't share with your spouse, this money is considered separate property. Determining separate property is one reason many people create a prenuptial agreement prior to getting married. In a prenuptial agreement, any separate property can be clearly defined, and what happens to that property can be specifically agreed upon if the time comes for a divorce.
An Inheritance is Separate Property Until It is Shared
When you receive an inheritance, the money you receive is considered separate property, even if you are married at the time of your inheritance. If you decide to share some of this money with your spouse, the money that you share becomes marital property. For example, say that you inherit $100,000. You take $20,000 and put it in a joint bank account. The $80,000 left is considered separate property, while the remaining $20,000 is considered marital property. Money placed in a joint bank account becomes marital property.
Accumulations During the Marriage are Marital Property
If you purchased property as a married couple, created a savings account, or built up your retirement accounts, all of these assets are considered marital property. These will be divided either split down the middle, or what is deemed fair, depending on the type of state you live in.
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