In divorce, dividing jointly-held assets can be challenging for many couples. However, the court may not divide some of the assets in their household. What should you know about this separate property?
What is separate property?
In a divorce, a couple’s property falls into one of two categories. Community property is jointly-owned, and both spouses have a claim to that property in a divorce. On the other hand, separate property is the sole property of one spouse. According to Arizona Revised Statutes § 25-213, “separate property” includes:
- Property that only one spouse inherited
- Gifts received by only one spouse
- Property acquired before the marriage and income earned on that separate property
Couples may also choose to outline some property as separate in a prenuptial or postnuptial agreement.
Can separate property become community property?
While some of your property might begin as separate property, it may become community property through a process called commingling. Commingling occurs when a couple mixes their separate property with their community property, making it challenging to identify which property is separate. Commingling can happen in a variety of ways, including:
- Depositing inherited funds into a joint bank account
- Using community funds — such as those from a joint bank account — to pay the mortgage on a home acquired before the marriage or to improve that real estate
- Funding an investment account with both spouses’ funds
- Adding a spouse’s name to a previously separate bank account
While commingling can create additional challenges during a divorce, it is possible to protect your finances. Financial professionals may be able to untangle commingled assets. A sound legal strategy can help you further protect your financial future during the divorce process.