By Marital property, which is also known as marital assets, spousal assets, or community property, tends to matter bout taxes, estate laws, and divorce. In most circumstances, separate property applies to assets you own but shall go into the marriage. This will then become marital property. However, it is also used to assets that are acquired through marriage. Moreover, the difference between these can be blurred out. Here, you’ll be able to ask about how separate property become marital property. In this article, we’ll be able to answer your question and other factors associated with marital property.
What is a Separate Property?
Before we go into knowing what a marital property is, you must know what a separate property is. Separate property is a property that belongs to you as an individual. Your spouse doesn’t have any right to claim it. Moreover, there are two major kinds of separate property.
The first is applied to assets that you own before you get married to your spouse. For instance, you buy yourself a Mercedez C-Class with your own money. After years of buying it, you get married. Even after getting hitched, this car will be still yours and not your spouse’s. This is because you bought that vehicle before you got married.
The second kind of separate property applies to assets that you have got as gifts, inheritance, or any kind of unilateral transfers. For instance, you got a gift from your friends on your birthday, which is a $1000 gift voucher from Tiffany’s & Co. This gift will remain your separate property, regardless of your marital status.
What is Marital Property?
Marital property is meant by assets or properties that are acquired through marriage. It is vital to understand that this only applies to the duration after the couple are legal spouses. Similarly, if you have acquired an asset while dating but before marriage, it will remain as separate property.
The definition of marital property only applies to assets that are earned, purchased, or acquired in any way rather than a unilateral transfer. For instance, you have a job earning a regular salary. After that you get married. From the date of the marriage onwards, your income will become marital property. This is because you’re earning it while being in the marriage.
In theory, the main difference between marital and separate property is simple. If you have received any assets before your marriage through unilateral transfers, it will be a separate property. However, if you have earned or acquired any assets during the marriage other than a unilateral process, it belongs to you and your spouse.
What is a Divisible Property?
There is also a third category of property, which is known as divisible property. Similarly, this is a kind of property that was acquired before the date of separation. But has been received after separation, or the marital property whose value has been changed since the separation of the couple.
How does Separate Property become Marital Property?
During divorce or separation, emotions of both the spouses tend to run high. Moreover, even at an amicable split tends to be difficult and stressful. Similarly, one of the biggest troubles within such situations can be caused due to the division of the assets. Especially when it seems too unfair to one spouse.
Having a better understanding of what separate property is, and how does separate property becomes marital property, will assist in preparing you for the legal procedure of property division.
In many states across the US, property division matters whether that state is ruled by “common law property or “community property”. We will get to know the difference between common law property and community property later.
Common Law Property States vs. Community Property States
The state you live in will determine the assets that are your marital property or separate property.
Common Law Property States
In the US, most states are considered common law property states. The common law system states, property that is acquired by one spouse, is completely and solely owned by that spouse despite being in marital ties.
Moreover, under this legal framework, if the title or deed to an asset is put in with names of both the spouses, the property shall belong to both the spouses. Similarly, with the name of both spouses on the title means, each will own one-half interest.
For instance, if the wife buys a car and puts it in her name only, it shall be considered as separate property. This means the car is property only in the wife’s name and the husband has no share with it. On the other hand, if the wife purchases the car and puts her and her husband’s name on it, the asset is marital property.
Under common law, when one spouse is dead, their separate property is distributed as per their will, or according to probate, if there is no will in effect for that individual. The property division under common law depends on the type of legal ownership the spouse has in terms of marital property.
For example, if one spouse owns a property in joint tenancy with the right of survivorship, or tenancy by the entirety, then the property will go to the surviving spouse. Moreover, this right is independent of what the deceased spouse’s will might say.
On the other hand, if the property has been owned under tenancy in common, then the property might go to someone other than the surviving partner, as per the deceased spouse’s will. Moreover, not all property has a title or deed. In such cases, usually, whoever has paid for the property or received it as a gift will own it.
In divorce or legal separation within common law states, the court has the power to decide how the marital property shall be divided according to state laws.
Community Property States
States that follow the rule of community property are Arizona, California, Idaho, Louisiana, Nevada, Texas, New Mexico, Wisconsin, and Washington. These nine states follow the rule that all assets acquired during marriage to be considered as community property, meaning property of both spouses.
These nine states follow the regulation that all assets received during marriage will be community property, i.e., property of both spouses. Data provided by the Internal Revenue Service shows that the states of North Dakota and Tennessee also have passed elective community property laws. Similarly, Alaska too has joined hands in this matter.
Marital property in community property states is equally owned by both spouses. Similarly, the marital property includes earnings, property purchased with that earning, along with debts accrued during the marriage.
Moreover, earnings and debts that are acquired before the wedding are considered as separate property, as it is an inheritance of only one spouse, even though the couple might co-mingle property if they wish to.
If you are someone who resides in community property states with your spouse, you will have to account for your community earnings, along with separate income if you are filing separate tax returns. Moreover, if either of you pass away, title of the joint property will be shifted to the surviving partner.
Ways to make Separate Property into Marital Property
One of the most complex factors of separate and marital property is at its roots. Most married couples tend to act as a single household. Similarly, they share assets, spend money from the same bank account, and hold property in common. This term in law is termed as “comingling.”
The process of comingling occurs when married couples tend to share separate property, or when separate assets are used by both spouses in some way. Similarly, such assets are reclassified as marital property. This can occur in a variety of ways depending on the type of asset. Following are ways separate property becomes marital assets:
Merging fungible assets into a single account
If you are someone who uses a single account for holding your separate and marital assets, they shall be reclassified into marital property. Moreover, it often applied to saving accounts and checking accounts. For instance, you have a bank account with money that has been earned before marriage. You get married but continue to deposit your paychecks into this account. Similarly, regardless of whose name is on the account, most states the entire account shall be now considered as marital property.
Moreover, as you have co-mingled marital property (earned during marriage) with separate property (earned before marriage), all the money will now become marital property.
This process is true for most kinds of fungible assets. For instance, the same can be applicable if you merge your investment portfolio with your spouse’s. Similarly, those stocks shall have belonged to you before marriage, but merging it with your spouse will entirely become marital assets.
Acquiring assets during the marriage
Assets or property that you acquire during your marriage are considered as marital property. This might trigger the concept of comingling, moreover, if you make use of separate property for purchasing shared assets. For instance, you might have an account with money that you earned before marriage. You have kept this account isolated, making it separate property.
Now you and your spouse decide to purchase a home using this money. Regardless of the name on the deed, the house will count as a marital asset because you purchased it during the marriage. Similarly, this process has effectively converted your previously earned money into a marital asset, as you have purchased an asset that you will be sharing with your spouse.
Appreciating assets during the marriage
When it comes to the matter of non-fungible assets like real estate, sharing it simply with your spouse will not necessarily turn the asset into marital property. For instance, you have your own home, and then you get married. Your spouse moves in with you. Moreover, in many states across the US, simply letting your wife/husband live in the house does not make it a shared asset.
Similarly, you owned it before your marriage, and it shall remain as separate property. But make sure to check this carefully, as state laws might differ from one jurisdiction to another.
The second factor is appreciation. Now you might wonder what happens if the value of the house goes up within the course of marriage? For instance, suppose over the years you are married, the value of the house increases by $300,000. Moreover, you might get divorced and after the divorce you sell the house. Does that mean you owe your ex-spouse money?
This will depend. Generally, market-based appreciation is usually not considered as a marital asset. Similarly, if the value of your home increases simply because of the rise of price in the real estate market, then that additional money entirely belongs to you and not your spouse.
Moreover, the same would be applicable for equities that you have owned going into the marriage. Similarly, if it accrued value because the market flourished, you do not own your spouse anything.
Every state in the US has a different say in defining how separate property become marital property. Moreover, as a rule, if you have contributed to a separate property during the marriage for the benefit of the household. There is a high chance of the court declaring it as marital property.
Finally, we suggest that you hire an experienced family law attorney to have a better understanding of the property division that might occur after you get married. They will provide you with a better understanding of the laws and statutes applicable within your state regarding separate property becoming marital property.
Final Words
Now you have a better understanding in how does separate property becomes marital property in the United States. You must make sure you are aware of your state’s laws related to separate and marital property. Moreover, it is also advised that you take advice from an experienced family law expert to have a better understanding of matters of property division.
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