Who Owns What? – Community Property and Separate Property in a Divorce

Aug 8, 2012 by

Splitting up marital assets is often one of the primary issues during a divorce. The question is, who owns what? In a community property state, everything that either party earned during the marriage is owned equally by both and will be split evenly. The same applies to debt. If one spouse accumulated a great deal of debt during the marriage, the other spouse, in effect, “owns” half of that debt. He or she is liable for payment, and creditors can pursue the “non-owing” spouse. This includes credit card bills, mortgages and car loans.

Separate property is property that the husband and wife own separately. This includes property own prior to the marriage, property inherited by one of them during the marriage and any property earned or acquired following a legal separation. Sometimes, separate property and community property become co-mingled. For example, a man buys a house prior to marriage, then gets married. The wife subsequently also resides at the house and contributes to the mortgage payments. The house is community property, owned equally by both, because they both contribute to the mortgage payments. However, the portion of the payments made by the husband prior to the marriage remains separate property. Meticulous record keeping is necessary to determine rightful ownership.

Debts incurred prior to a marriage are considered separate property. For instances, college loans would belong solely to the party who incurred the debt.

Some states consider the date of separation the date community property ends and separate property begins. Other states use the date when one of the parties moves out of the marital home. The date is crucial because property acquired after that date but while still married is at issue. As a rule, a judge will want evidence when a spouse physical moved out of the marital residence. It’s important for both parties to close joint accounts following a separation to avoid co-mingling of funds.

There are times when property belonging to one spouse can be given to the other spouse. For example, a Qualified Domestic Relations Order might specify that a spouse must turn over all or part of an IRA or pension plan account to the other. A judge will usually make such a decision on the length of the marriage and who needs the asset more.

Divorces are rarely easy and often made more difficult by property settlement issues. Keeping track of  marital property can become very important in the event of future disputes.

 

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