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Distinguishing what is separate property after a divorce

It is not unusual these days for couples in California to get married later in life. Unlike a couple that marries for the first time in their 20's, when a couple marries for the first time in their 40's, each spouse may have already accrued a significant amount of wealth.

In general, property owned before a spouse was married is considered separate property in the event of a divorce, instead of marital property. Take for example, a bank account. Suppose a person is single and has thousands of dollars in a bank account in their name only. The person get married, but continues to put the wages they earned into that account. Years later, the couple decides to divorce. That bank account that was opened separately before the marriage has remained separate property right?

Not always.

In general, assets obtained while the couple was married and before separation occurs are considered marital property -- also known as community property. This is true even if only one spouse holds title. Community property is subject to division during a divorce.

However, some property is considered separate property that will not be divided during a divorce. This includes property owned by only one spouse prior to the marriage, gifts to one spouse only, inheritances, personal injury awards and property designated as separate in a prenuptial or postnuptial agreement.

That doesn't mean the issue is cut-and-dried, however. What was separate property can, during the course of the marriage, transmute -- or commingle -- with community property. When this happens, the once-separate property becomes community property, since the two have mixed together.

Are there ways a spouse can protect their separate property and keep it as such? One way to do this is to enter into a prenuptial agreement, or if a couple is already married, a postnuptial agreement. Another way is to keep detailed records as to what happens to separate property during the course of the marriage, to ensure it isn't being commingled. Also, avoid funneling separate property into the same accounts as community property and avoid using separate funds to pay for community property, marital debts or household expenses.

These are only some suggestions with regards to keeping separate property from commingling with community property. For more advice as to your exact financial situation, the help of a professional may be in order.

Source: Forbes, "Getting Married? Got Assets? Read This First," Orrit Hershkovitz, Jan. 30, 2015

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