When you get married, you agree to share property with your spouse simply because you’re married. However, there is property that you may have had before your marriage that can remain yours alone, meaning it’s considered “separate property.” There is also property you may acquire after your marriage that may be classified as separate property in the case of divorce or death. If you are in a domestic partnership, the rules may be slightly different as well. Consider working with a financial advisor as you create or modify a financial plan to cover your needs.
What Is Separate Property?
Separate property, also called non-marital property, is any property, real or personal, acquired before marriage, during marriage through inheritance or gift, during marriage by separate property funds and after divorce. If you own separate property that is income-producing, the income is also considered separate property. Separate property does not have to be divided between spouses if they divorce or one of them dies.
In the case of domestic partnerships, if the partners are registered domestic partners, the property is only considered separate if it was acquired before registration or paid for entirely with funds acquired before registration. The domestic partners can also include a list of their individual separate property with the domestic partnership agreement.
There’s often a question of who owns what in the case of a divorce or the death of a spouse. To answer that question, the laws of the state regarding separate and marital property must be accounted for. You also have to consider whether your state is a community property state or a common-law state, as laws may vary slightly in their legal definitions.
What’s the Difference Between Separate Property and Marital Property?
It’s important to know if what you own is separate or marital property for the purposes of divorce and estate planning. This is also necessary if you decide to draw up a prenuptial agreement.
Marital property is everything you earn or acquire during the marriage. So if you buy a house, car or other possessions and pay for it with the income that you earn during the marriage, that is marital property. If one spouse inherits a house from their parents during the marriage, then that is the spouse’s separate property.
Separate property is generally determined by the following rules:
- Property owned by one spouse before marriage is separate property. An example might be a car owned by you before you got married.
- Property gifted to or inherited by one spouse before or during the marriage is separate. For instance, if an elderly aunt gives you the family’s antique silver flatware before or after her death, that would be your separate property.
- Property acquired by one spouse during the marriage and never used by the other spouse is also separate. If you purchase a camera during marriage and it’s never used by your spouse, that is separate property.
- Separate property is also that which both spouses agree on in writing belongs to one another. If both people come into a marriage with assets, they might want to agree in writing that their assets would come back to them in the case of divorce or death.
- The definition of “separate” also applies to property that’s acquired by you as separate property and, if it’s income-producing property, the income also is separate. For example, if one spouse comes into a marriage with $50,000 in a savings account, that is separate property along with the interest. If that money is co-mingled with marital property, you’re in danger of losing your separate property.
- Certain personal injury awards can also fall under separate property.
Common-Law (Equitable Distribution) vs. Community Property
To decide whether property is separate property or marital property, you have to consider whether your state is a common-law state or a community property state. Here’s an overview of the ins and outs of these general statutes:
- Common-law property ownership: Common-law is also called equitable distribution. Most states are common-law states. If your name is on the deed to a piece of property, then you are the owner. If both spouses’ names are on the deed, they each own half-interest. But if there is no title document, you own it if you paid for it or if you received it as a gift.
- Community property ownership: Laws in community property states are more complicated. In general, there are three classifications. If you owned property before your marriage, it is your separate property. The same is true if you were gifted or inherited property before or during your marriage. Otherwise, property is owned by both spouses. For example, a house or car bought during your marriage with your income is community property even if the deed or title is in one spouse’s name. If you inherit a house during your marriage, then it is your separate property. The same is true if you are gifted any item. It remains your separate property. Otherwise, everything is community property regardless of the deed or title. If you bring money in an account into a marriage, it is your property unless it becomes so co-mingled with the marital property that it becomes impossible to tell the difference.
There are a handful of community property states in the U.S. As of the time of this writing, they include Alaska (by agreement), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
You should be clear about whether property you and your spouse have is separate or marital. You should also be careful to conduct your financial affairs during the relationship so whatever distinctions you want regarding property are maintained rather than muddied. It may be wise to draw up a prenuptial agreement before marriage so property may go to one spouse or another according to both your wishes. Also, when you do your estate planning, have a will drawn up stating your specific wishes. Finally, you may also want to consider the appropriate type of trust.
Financial Planning Tips
- You may want to work with a financial advisor as you coordinate your marriage and estate plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re not interested in working with a financial professional, you can try making a DIY financial plan. Check out SmartAsset’s guide to financial planning software to get started.
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