Last Updated: December 14, 2022
Marital property vs. nonmarital property–what’s the difference? When people marry, money, debt, and property take on additional legal implications. Though distinguishing nonmarital and marital property may not be important during the union, it becomes a top priority during a divorce. Division of property can lead to many heated arguments about who owns what and couples often look to an expert divorce lawyer for a free evaluation when dealing with marital property issues.
Nonmarital vs. Marital Property
During a divorce, spouses must divide property that they previously shared. Almost all property acquired after a wedding is considered marital property and is subject to division. Property owned by either person prior to the marriage often remains property of its original owner but there are exceptions even within this area, making division of property a very complex process. In fact, all states vary slightly on what is marital property.
Community Property vs. Equitable Division
There are basically two types of ways property is divided during a divorce, and it depends on if you live in a state that follows “community property” rules or “equitable division” rules. They are similar in some respects, so it is easy to get the rules confused. Knowing which type of state yours is should be the first step to understanding whether property is marital or nonmarital should a divorce take place.
Only a handful of states (9) follow community property rules during a divorce. Community property states has rules on dividing property that a married couple accumulates during the marriage. Property that is obtained (and paid for) prior to the marriage will ordinarily be treated as separate (nonmarital) property. All assets, bank accounts, and wages in community property states are equally (50/50) owned by each spouse, regardless of whose paycheck it came from. Divorce judges will strictly divide everything that is marital 50/50, regardless of the needs of either person.
The vast majority of states follow an equitable division of property during divorce. This is NOT necessarily ‘equal’, but usually is somewhere close to that. Equitable division, here, means what is ‘fair’ to both people. It might be fair to take into account a persons pre-marital $5-million dollar paid for 2nd home and award a larger share of the marital property to the other spouse (maybe 60/40, 65/35, etc.). The entire goal of the divorce judge is to make it fair, not necessarily even.
Dividing Marital Property is Complex
Expert divorce attorneys provide several tips for reducing the complexity involved in marital property management. Before marrying, a couple with individual assets should consider a prenuptial agreement that clarifies which property is not subject to division upon divorce. In addition, accurate records should be maintained to document the separate nature of property held prior to marriage or received by one spouse through inheritance during the marriage.
Commingling assets means that a nonmarital asset (like a bank account with $10,000 in it before the marriage) gets used for a purchase during the marriage (down payment on a home). That pre-marital asset is now marital property. If one spouse is concerned about keeping certain property after a divorce, steps should be taken to maintain the separation of these personal assets throughout the marriage. This means that the property should not be commingled with property acquired by the couple during the marriage. Only nonmarital assets should be used to purchase property that the purchasing spouse wants to be considered nonmarital property.
For example, a boat purchased during a marriage will be more likely to be considered nonmarital property if it is purchased with money that the buyer had before getting married and maintained in a separate bank account. Records would need to be dug up to prove this, of course.
Nonmarital funds should never be used to repay marital debts. They also should not be used to open joint bank accounts even if the nonmarital portion will be tracked separately. On the other hand, income earned during a marriage should not be deposited into a nonmarital account or the account may lose its status as separate property.
Assuming is a Big Mistake
One of the biggest mistakes that couples make is to assume that property owned by one person prior to marriage will be excluded from marital property. Divorce and property division contain a lot of fine print and merely making joint improvements to a home that one spouse owned prior to a marriage can entitle the other spouse to some compensation for the increased value. This is true in both community property and equitable division states. Marital property rules need to be followed very closely.
A knowledgeable divorce lawyer will understand the marital property rules and help clients maintain the desired division between marital and nonmarital property. A properly written premarital agreement can solve many problems, but if its too late to do so, a divorce lawyer that offers free consultations is your best bet to ensure property is properly divided. Don’t wait, act fast and protect your rights.