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Property in a Legal Separation

Property and finances after separation

When a married couple experiences problems in their marriage, there are three common outcomes…they work it out, they separate, or they divorce.

When it comes to separating, there are two types of separation:

  • Separation (not recognized as a legal marital status, thus just living apart but still married)
  • Legal separation (legally recognized as a marital status)

In a legal separation, a court will be the place where final judgments are made related to how a couple’s assets and debts will be handled. In some situations, a couple will be able to reach an agreement, thus outlining the distribution/division of assets and debt (legal separation agreement). When this can’t be achieved, the court will rely upon the state laws to determine the outcome of the assets and debt. 

Assets and debts in legal separation

When it comes to assets and debt in legal separation, the process is very similar to divorce. Most states follow common law rules, although some rely on community property rules. Generally, property that was brought into the marriage (separate property), generally remains separate, thus not being subject to division. On the other hand, when you are married, chances are good that during the marriage, you and your spouse will obtain items, property, assets, and other things (also commonly referred to as community property). Furthermore, debt is another shared aspect of the relationship. Due to this (and regardless of the amount), when you seek legal separation, those assets are likely going to be subject to being distributed between the two parties.

In a perfect world, at this point in the process, things are much easier when the parties can agree to how they will divide their assets as well as how debt will be handled. For instance, if you purchased a home while married, maybe one of spouses will wish to remain in the house as opposed to selling. Part of the agreement may be tied to the remaining spouse paying the other spouse for their half of the value of the home.

Community property and Separate property

If you are unable to come to an agreement about division of assets and debts, the courts will be forced to step in to make the decision. The court may choose to approach the distribution of assets from a physical division perspective or from one where they award a percentage of the total value of the property to each party. Ultimately, when this happens (and depending upon your state laws), the courts will divide the property based upon the principles of community property or equitable distribution.

If you are subject to community property laws, all property that you and your spouse have will be divided into community and separate property. In general, separate property is that property that you had coming into the marriage (or possibly subject to a prenuptial agreement or inheritance). In this scenario, the community property is divided equally between the spouses.

If you are subject to equitable distribution, it is important to understand that equitable is not necessarily equal…it is meant to be a matter of what the court determines is fair. In this scenario, courts may even order one party to use their separate property to reach an equitable settlement for both parties.

Division of marital property

In the end, division of marital property can be a high tension, anxiety ridden, and emotional experience. Finding a way to settle the division of property out of court is certainly the preferred route, but when you hit a snag, having a qualified family attorney in your corner can increase the chances of ensuring that the property is divided correctly.