The need to separate financial accounts and property is one of the biggest conflict risks in any divorce. Not all couples have children, but most marriages result in shared property and financial obligations. The property division process can quickly become contentious, as spouses may feel very strongly about what they perceive as fair and appropriate given their circumstances. Spouses may have a hard time addressing assets with significant financial value or that represent emotional memories for the family.
Predicting the outcome of property division is all but impossible when couples litigate. However, people can begin planning for the future by identifying their separate or nonmarital property. What assets can people typically exclude from division as they prepare for property division proceedings during divorce?
Property owned before marriage
Modern marriage trends indicate that many people marry later in life. They may have already established their careers and acquired various high-value assets. The resources that people accumulate before getting married typically remain their separate property when they divorce. Separate property may include any interest accumulated or appreciation in value that occurs during the marriage.
Inherited items and gifts
Family members and others who have close relationships with either spouse may provide gifts to that spouse during the marriage. People may also name either spouse as a beneficiary in an estate plan. Regardless of the timing of the transfer of a gift or an inheritance, assets intended for one spouse typically remain their separate property. Provided that spouses maintain gifts and inheritances separately from marital property, they do not have to divide those assets when they divorce.
Items protected in a marital agreement
Prenuptial and postnuptial agreements can outline how couples should divide their property when they divorce. They may also include clauses designating certain resources as separate property. In most cases, provided that the courts recognize the marital agreement as a valid contract, assets designated as separate property in those agreements are not included in the pool of marital property for the purposes of equitable distribution during a divorce.
Understanding what assets remain the sole property of one spouse can help those preparing for property division negotiations during complex, high-asset divorces. Spouses who have valuable separate property can use that as a foundation as they begin planning their financial future.
