It's easy to feel like you're losing everything in your divorce, including your hard-earned assets. That feeling of being left with nothing would be made worse, if all the property you owned before you married was also at stake. Fortunately, usually, that's not the case. It's important to understand how various states treat property you owned before you married so that you can ensure it stays with you when you divorce.
Equitable Distribution and Community Property
Courts determine property division for divorcing couples either by equitable distribution, or by community property distribution, depending on state law. In equitable distribution states such as Florida and in community property states such as California, property you acquire during the marriage -- regardless of which spouse's name is on the deed or the title -- belongs to both spouses equally, as marital property. Upon divorce, in equitable distribution states, marital property must be divided fairly -- that is -- equitably, between you. Usually this means equally, but it may not mean an exact 50/50 division; situations exist in which an unequal distribution is made to compensate one spouse for a financial inequality. This could occur when one spouse has a substantially lower income or has financial obligations that result from child custody. In community property states, marital property must be divided equally between divorcing couples.
Separate property is any property you owned before your marriage or registration of your domestic partnership. When you get married or register your domestic partnership, each spouse's separate property remains separate property. Gifts given to one spouse, inheritances, judgments and settlements acquired by one spouse are all also separate property. One exception is when a portion of the judgment or settlement is specified as compensation for wages lost during the marriage. In this instance, the lost wages portion of the judgment or settlement belongs to the marriage because all wages earned by either spouse during the marriage are property of both spouses.
When a portion of a single asset is separate property but a portion is property of the marriage, the property is said to be comingled. For example, if you have a pension plan through your employer, contributions made to it before marriage belong to you as separate property, but contributions made during your marriage or partnership belong to the two of you jointly. It is still one fund, but part of it is yours alone, and part of it you jointly own with your spouse. Another example is home ownership. If your down payment is separate property but you live in the house with your spouse and payments are made with joint earnings, the equity accrued is marital property, while the amount of the down payment remains separate.
Transmuted property is property that started out as separate property before marriage but became property of the marriage through mutual agreement and treatment. For example, if you have a bank account before marriage that is yours only, but after you marry you add your spouse and you both use the account without keeping the pre-marital balance segregated, all the money in that account becomes marital property.
Separate Property Upon Divorce
In divorce, separate property stays with its original owner. This is true in both equitable distribution and community property states. In instances of co-mingled or transmuted property, the separate property portion of each asset may be separated to stay with the original owner. The marital portions of these assets are divided between you, according to the laws of your state. In equitable distribution states, while separate property remains with its original owner, it can be justification for an unequal, equitable distribution of marital assets. If one spouse's net worth is increased substantially by his separate property, the court may award more of the marital property to the other spouse.