Divorce Articles Section
WHAT IS OUR PROPERTY?
by Carol Ann Wilson, CFDP (Certified Financial
When looking at the property issues in divorce, the couple always
asks three questions: "What constitutes property, what is it
worth, and how will it be divided?"
WHAT CONSTITUTES PROPERTY?
Property includes such assets as the family home, rental property,
cars, and art or antique collections. It can also include bank accounts,
mutual funds, stocks and bonds, life insurance cash value, IRAs,
and retirement plans. As you can see, there is virtually no limit
to what can be considered property.
Although the laws vary from state to state, property is usually
divided into just two categories: separate property and marital
In general, separate property includes what a person:
(a) brings into the marriage,
(b) inherits during the marriage, and
(c) receives as a gift during the marriage.
On the other hand, marital property is everything acquired during
the marriage no matter whose name it's in. In some (but not all)
states, marital property also includes the increase in value of
WHAT IS IT WORTH?
Beth and her husband are getting a divorce. Assume that when Beth
got married, she had $1,000 in a savings account. During the marriage,
her $1,000 earned $100 in interest and now the account is worth
$1,100. She did not add her husband's name to the account. Her property
is $1,000, because she kept it in her name only, and in some states,
the $100 in interest goes into the pot of marital assets to be divided
because that is the increase in value of her separate property.
If Beth had put her husband's name on the account, she would have
turned the entire account into a marital asset.
Now let's assume that Beth's aunt died and left her $10,000. That
is an inheritance. If she put it into an account with her name only
on it, then at the divorce, it is her separate property except for
the increase in value. It is the same with a gift. When she received
the gift or inheritance, if she put it into a joint account, she
turned that money into marital property.
Beth saves $100 of her paycheck every month. She puts this $100
a month into an account with her name only, and now it is worth
$2,600. At her divorce, is this money separate or marital property?
This is fairly straightforward. It is marital property because it
is acquired during the marriage, no matter whose name it's in.
What if Beth owned stock worth $10,000 when she got married? On
the day of the divorce, it is worth $9,000. Is that a $1,000 marital
loss? Yes. If there is a marital increase on one asset, it can be
offset with a marital loss.
Assume that when Beth got married, her husband gave her an eight-carat
diamond ring. Let's assume that they are in court and she is testifying
that the ring was a gift from her husband so it is her personal
property. He says, "Are you kidding? I would not give you an
eight-carat diamond. That was an investment, so therefore it is
marital property." The judge decides. Typically, however, women
get to keep their jewelry, their furs, and similar types of gifts.
Men get to keep their tools, their guns, and their golf clubs.
What if Beth's husband had given her an $80,000 painting for her
birthday? She claimed it was a gift and he claimed it was an investment
and therefore should be treated as marital property. In this case,
the judge did deem that it was an investment and was considered
marital property. But remember that you can never predict what the
judge will decide!
What happens when both parties want the same item? Let's say Beth
and her husband had divided all their property except for one item.
They couldn't agree who was going to get the set of antique crystal
that had come from England. They both wanted it so badly that they
ended up spending $60,000 in court to decide that one issue. Seems
absurd, but it happens every day. At $60,000, they could have each
bought a set of crystal and a trip to England!
Most often, the home furnishings are not included on the list of
assets because the couple just divides the items. If they are to
be valued, the typical value is what you can get at a garage sale.