What Is Considered Marital Property?
Marital property is typically divided between the parties in a divorce action. With few exceptions, marital property means those assets that were acquired during the marriage from the time of the wedding to the date a summons for divorce is filed with the county clerk.
- Assets that are acquired prior to the marriage and after the filing of the summons, and by inheritance, gift from a third party, and for personal injuries, are the separate property of the recipient spouse. Separate property is never divided between the spouses, provided that the recipient spouse can prove the separate property origin of the asset, and also provided that the separate asset remains intact as recognizably separate (more on this below).
- Before marital property can be divided, it must be identified. One purpose of the Statement of Net Worth, the financial statement that all parties to a divorce action must prepare, is to set forth a full list of property that each of the spouses owns, or has some interest in. This list is used as a starting point to identify the assets that may be divided. However, the manner in which an asset is identified in the Statement of Net Worth is not conclusive. For example, a spouse may believe that an account he owned before the parties were married is his separate property. However, he would be correct only if the account has remained a passive investment without marital monies being deposited into during the marriage, and further provided there are statements available that show the account actually existed at the date of marriage. If there are no statements available from the date of marriage, the asset will be considered entirely marital.
- Some marital assets are not easily divided and their value is not easily ascertained. Business interests and stock options are examples. When one of the spouses owns an interest in a business, an appraisal of the value of that interest is performed by a forensic accountant. That way, the other spouse can receive equitable distribution of the business-owning spouse’s interest in the business without forcing the business to be sold.
- When marital property is divided, each spouse receives an equitable portion of the marital property belonging to the other spouse. This is generally done one of two ways— either the asset is physically divided, i.e., a withdrawal is made from an account and paid to the other spouse, or the value of the asset is offset against the value of another asset or assets that the other spouse will retain. Valuation is important for the second method, since the parties will want to be sure that what they are keeping is equal to the value of the thing or things they are waiving. Often, assets are divided both ways in any given case, depending on what works best for the parties.