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Separate property is property which is owned by one spouse in a marriage. If the marriage dissolves, spouses retain ownership of their separate property and they are not required to share this property with the division of assets. In contrast, marital or community property is owned by both spouses in kind and must be divided fairly in the event of a divorce. It is important to consider the issues of separate versus community property before getting married.
As a general rule, property which is held before the marriage and kept separate is considered separate property. However, take the example of a business. If one spouse owns and operates a business, income from that business earned during the marriage might be considered community property. The partner could be considered to have a share in the business, even if his or her name is not on the business. Consequently, if the couple divorced, it might not be treated as separate property.
Other examples of separate property include things like bank accounts which are held separately, along with other assets. Inheritance and gifts acquired during a marriage can also be nonmarital property if they are held separately, as are exchanges. However, income from these assets is treated as community property in some regions. Anything acquired after the dissolution of a marriage is also separate property; in other words, if a couple divorces and one ex-partner buys a house, the other cannot claim a share in the house.
The line between marital and nonmarital property can sometimes become contentious during divorce proceedings. Even if property is held entirely in one person's name, there may be grounds for arguing that it has become community property as a result of the way in which it was used. For example, a bank account in one partner's name which was used by both partners is not considered separate property any more.
This issue explains why some couples enter into prenuptial agreements. These agreements clearly define any separate property being brought into the marriage and reinforce that this property will not be converted to community property during the marriage. Property law can get very complicated and people who are concerned about their assets may want to protect them with a prenuptial agreement. It is wise to ensure that some assets are held separately and cannot be contested so that they can be accessed quickly in the event of a divorce or separation.