Have you ever seen the movie called “Wedding Crashers?” If so, do you remember the scene with Owen Wilson and Vince Vaughn, acting as divorce attorneys, and the recently split couple is arguing over who gets what? The couple is arguing over what is called marital property.
Marital property is the property acquired by either spouse from the marriage date until the time of separation. When the couple stays married, one need not worry about the dissolution of that marital property because a will handles that. However, when a couple separates, the marital property system steps in and takes over. Each state has adopted one of two systems for the dissolution of marital property – the separate property system or the community property system.
The separate property system is derived from the common law and generally holds that each spouse owns property separately in their own name. Prior to the marriage, if one spouse owned property, that property is wholly owned by him or her and that spouse is individually liable for their own debts. During the marriage, if one of the spouses acquired and owned property, that property only belongs to the acquiring spouse unless the couple takes action to own is jointly. This thought process follows in hand when one spouse receives a gift or inheritance – the property is individually owned. As an accident lawyer from Eglet Adams can explain, a personal injur settlement or award may also be impacted in a divorce.
It follows that a creditor cannot claim an interest to one spouse’s assets in order to satisfy the debt of the other. Notably, the same process is followed regarding necessaries – a spouse is not liable for the medical debts of a spouse to third parties. If the couple divorces, separate property states follow the doctrine of equitable distribution. When dividing the property following equitable distribution, the court will distribute the property after considering the following: (1) the length of the marriage; (2) each spouse’s income; (3) each spouse’s contribution during the marriage; (4) the couple’s lifestyle; (5) the employability of each spouse; and (6) collaterals (age, debts, health, etc.).
The community property system is the complete opposite of the separate property system. Generally, the community property system treats the married couple’s assets as equally owned and undivided. It follows then, that property acquired during the marriage is shared and that property can be used to satisfy the debts of the indebted spouse. If the couple gets divorced, the property acquired during the marriage is separated evenly. Notably, however, similar to the separate property system, property acquired prior to the marriage is owned separately and will not be divided evenly in the event that the couple divorces.
Imagine that a couple gets married. Prior to the marriage, each spouse acquired a house. During the marriage, each spouse individually acquired a car and took out a loan to pay for the car, and each individually purchased a second home. In both systems, the homes acquired prior to the marriage would belong only to the acquiring spouse. In the separate property system, the car, debt, and second home would belong solely to the acquiring spouse unless the couple took action to own is jointly. Whereas, in the community property system, both spouses together would own the cars and second homes, and they would be responsible for the corresponding debt.