Assets Exempt From Equitable Distribution Upon Divorce

Property brought into the marriage by an individual is usually considered off-limits to the other spouse. However, this can change if premarital property becomes intermingled with marital assets. For instance, a bank account may become comingled if the other spouse is added to the account or if funds are used in a manner that blurs the line between separate and marital transactions. Additionally, if premarital property appreciates in value due to contributions from the other spouse, it might serve as a basis for awarding a portion to the other spouse. The approach to this issue varies among states.

Gifts and Inheritances:

Most states acknowledge that property acquired by an individual through a personal gift or inheritance is considered separate property and not subject to division. However, the burden of proving such separate property status usually falls on the spouse making this claim. Providing evidence like a will or deed showing the property was intended for that individual and not both spouses is often necessary.

State Laws:

States typically fall into two categories: equitable distribution states and community property states. In community property states, property earned or acquired during the marriage is jointly and equally owned by both spouses. However, community property states generally exempt premarital property, gifts, and inheritances from division, including any income generated from separate assets. In equitable distribution states, the court evaluates the origin of the property to determine its owner. Legal title of an asset may play a role in this determination. In these states, premarital property, gifts, and inheritances are typically excluded from division. The key difference between community property states and equitable distribution states lies in how marital assets are treated. Community property states often assume a 50/50 ownership split, whereas equitable distribution states aim to distribute assets fairly, even if it does not result in an exact 50/50 division. Equitable distribution states may allocate an asset acquired during the marriage solely to one spouse or order that certain separate property be given to the other spouse, as long as state law is followed. Factors such as spousal and child support, the length of the marriage, and each spouse's post divorce separate property may influence the court's decision.

Property per an Agreement:

Spouses have the freedom to negotiate property division rules if they are dissatisfied with their state's default regulations. This negotiation can occur during divorce through mediation or negotiation, with the judge incorporating the agreement into the divorce decree. Alternatively, couples can reach an agreement before marriage, commonly in the form of a prenuptial agreement. Such agreements specify how property will be treated in the event of divorce or the death of one of the parties. Prenuptial agreements often require specific procedures, like financial disclosures and obtaining independent legal counsel, to be enforceable. Postnuptial agreements are similar but are entered into after the marriage has taken place.

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