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Separate Property

No one walking down the aisle wants to consider that the marriage will not last forever. If it doesn't end in divorce, as 40 to 50 percent of American marriages do, according to the American Psychological Association, then death is inevitable. One spouse will most likely die before the other. The question arises: who gets a spouse's separate property?

Defining marital property is relatively simple. In most cases, it's anything a spouse acquires or earns during the course of the marriage. In the event of divorce, it's divided between them. But what happens with a spouse's separate property? When a couple divorces, each is entitled to retain his or her separate property; it's not up for grabs, subject to distribution. However, there are some exceptions to this rule.

What is Separate Property?

Premarital property is the most common separate asset a spouse might own. In New Jersey premarital property is yours and yours alone unless it is property purchased in contemplation of marriage. This situation usually occurs with the marital residence. Separate property can also include assets acquired during the marriage under certain circumstances. Gifts made solely to you, typically through inheritance, are your separate property. Also, in New Jersey the part of a personal injury award for medical expenses and lost wages is subject to equitable distribution; the part of the award for pain and suffering and disfigurement is not subject to equitable distribution.

What Could Possibly Go Wrong?

The home you brought long before you decided to marry your wife and is kept solely in your name, will remain your separate property, unless you make a mistake going forward and do something to muddy the waters. If you use money you or your spouse earn during the marriage to make mortgage payments or to make improvements you might have "commingled" the asset -- you've given your spouse a stake in its ownership. But if you rent the property and the rental proceeds take care of all those expenses, or if you pay for it from premarital money, you're most likely in the clear.

Even if you pay for maintenance, improvements and repairs from your separate money, be careful about asking your spouse to physically make home improvements. Her or his elbow grease can contaminate separate-property waters as putting marital money towards making improvements.

Similar rules apply to cash. If you inherit $50,000 and place the money in an account in your sole name, it will remain your separate property, unless at some point you add marital money to that account. If it's possible to trace these deposits, your initial deposit might be safe from distribution in a divorce, but if there were many such deposits over a long period of years, you might have lost half the account when it became marital property.

When Separate Property Appreciates in Value

If you purchased your premarital home for $250,000 and it appraises for $350,000 by the time you divorce and the property increased in value is simply because of inflation or market fluctuations, you may be safe. However, if it increased in value because of something you did, your spouse may be entitled to a share of that $100,000. This doesn't necessarily mean that you must sell your property, but you may have to give up other marital assets of equal value to compensate your ex for her share, or take out a mortgage or home equity loan to buy out her interest.

Of course, you can override all these rules with a solid prenuptial agreement. If you're considering marriage or divorce, and if you own property you think should be separate, call the Law Offices of Peter Van Aulen at 201-845-7400 for a consultation to find out where you stand or what precautions to take.

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*Results may vary depending on your particular facts and legal circumstances