Distinguishing Marital Property from Separate Property

In Separation & Divorce, Wealth by Elizabeth Stephenson

When couples divorce, one of the big issues that must be resolved is how to divide property. In the absence of a pre-nuptial agreement that addresses property division, the law entitles spouses to seek an equitable division of marital property. In short, this means that a court will take the total fair market value of all of a couple’s marital property and divide it in an equitable manner in consideration of numerous statutory factors.

Significantly, property that is considered “separate” property is not subject to division. Therefore, the classification of property as marital or separate is critical for both parties.

What is Marital Property?

Marital property is defined as “all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property”. This includes pensions, retirement accounts, military pensions, and real property owned by a tenancy by the entirety.

Generally, the key time frame to focus on when determining whether property is marital property is “all property acquired after the date of marriage and before the date of separation”. This is a good general rule for determining whether property is separate or marital, but there are exceptions. See a family law attorney if you have questions about the classification of any property.

What is Separate Property?

Separate property refers to “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage.” An exception to this is property that is specifically gifted from one spouse to another as separate property. In addition, the following is considered separate property:

  1. Property acquired using solely separate property, even if the other spouse is named on the title of the new property. For example, if a spouse owns a house before the date of marriage, but then sells that house to buy a boat, the boat would likely remain that spouse’s separate property. There are exceptions to this rule too, such as if the property is expressly intended to become marital property, then it would be classified as marital property for equitable distribution purposes.
  2. Income and gains relating to separate property.
  3. Professional and business licenses.

Therefore, when distinguishing property as separate or marital property, the critical information that attorneys and judges will consider include when the property was acquired, what funds were used to acquire the property, and whether there was any express agreement or intent as to how the property should be classified.

New Direction Family Law

You have legal rights when it comes to the property that you and your spouse acquired during your marriage. Let us help you preserve and exercise those rights. At New Direction Family Law, we understand that our clients are coming to us at a time of great need and pride ourselves in providing smart, effective legal representation. Your financial future is important to us. Our office serves Wake, Johnston, Durham and surrounding counties. Contact New Direction Family Law at (919) 719-3470 to schedule an appointment or reach us online through our website.