Marital vs. Separate Property: What Belongs to Who?

Mar 2

Dividing assets in a divorce can be one of the most contentious aspects of the process. Whether you are negotiating a settlement or litigating in court, understanding the difference between marital and separate property is crucial in determining who gets what. At Hoffman Family Law, we help individuals navigate the complexities of asset division, ensuring that their financial interests are protected.

What Is Marital Property?

Marital property refers to assets acquired by either spouse during the marriage. In most cases, these assets are considered jointly owned, meaning they are subject to division upon divorce. Courts assume that both spouses contributed to the marriage in some way—whether financially, emotionally, or through household contributions—so marital property is generally divided in a way that is deemed fair.

Marital property includes:

Income earned by either spouse during the marriage

Property purchased during the marriage (homes, cars, furniture, and other valuables)

Retirement accounts and pensions that accrued value while married

Bank accounts and investments made with marital funds

Businesses started or expanded during the marriage

Debts incurred during the marriage (such as credit card debt, loans, and mortgages)

Even if an asset is in only one spouse’s name, it may still be considered marital property if it was acquired during the marriage. For example, if one spouse buys a car in their name using income earned during the marriage, it is typically classified as a marital asset.

What Is Separate Property?

Separate property, on the other hand, consists of assets that legally belong to one spouse alone. Generally, separate property is not subject to division in a divorce, provided it has been maintained separately and has not been commingled with marital assets.

Separate property typically includes:

Assets owned before the marriage

Inheritance received by one spouse (even if received during the marriage)

Gifts given specifically to one spouse

Personal injury settlements awarded to one spouse for pain and suffering (though compensation for lost wages may be considered marital property)

Assets outlined as separate in a prenuptial or postnuptial agreement

A key factor in determining whether something remains separate property is how it has been treated during the marriage. If separate assets become intertwined with marital finances, they may lose their separate status.

When Separate Property Becomes Marital Property

One of the most complex aspects of asset division is when separate property becomes marital property, often referred to as "commingling." This happens when separate assets are mixed with marital funds or used for the benefit of both spouses. For example, if one spouse owns a home before marriage but adds their spouse’s name to the deed, that property may now be considered marital. Likewise, if a spouse inherits money and deposits it into a joint bank account that both spouses use, the inheritance may lose its separate status.

Similarly, "transmutation" occurs when separate property is used in a way that shows clear intent to convert it into marital property. If a spouse uses their personal inheritance to renovate the family home, courts may determine that the funds were intended for shared benefit and classify them as marital assets. To prevent commingling, individuals should keep separate assets clearly distinguished—such as maintaining separate bank accounts for inheritances or retaining sole ownership of pre-marital property.

How Courts Divide Marital Property

When couples divorce in New Jersey, the division of assets follows the Equitable distribution model. Unlike community property states, which require a strict 50/50 split of all marital assets, New Jersey courts aim for a fair—though not necessarily equal—distribution of marital property. The court evaluates several factors to determine what constitutes a just division based on the unique circumstances of each case.

Equitable Distribution in New Jersey

Under New Jersey law, marital property includes assets and debts acquired during the marriage, regardless of which spouse’s name is on the title or account. This may include real estate, retirement accounts, investments, businesses, vehicles, and personal property. However, separate property, such as inheritances, gifts received by one spouse, or assets acquired before marriage, is generally not subject to division—unless it has been commingled with marital assets.

Since equitable distribution does not mean an automatic 50/50 split, New Jersey courts consider various statutory factors under N.J.S.A. 2A:34-23.1 when determining how to divide marital assets, including:

The length of the marriage – Longer marriages often result in a more significant financial intertwining of spouses, impacting the division of assets.

Each spouse’s income, earning capacity, and financial resources – If one spouse earns significantly more than the other, the court may award a larger share of the assets to the lower-earning spouse.

Contributions to the marriage – This includes both financial contributions (such as salary earnings) and non-financial contributions (such as being a stay-at-home parent or homemaker).

The standard of living established during the marriage – Courts strive to ensure that both spouses can maintain a similar quality of life post-divorce.

Age and health of each spouse – If one spouse has significant medical needs or is nearing retirement, this may impact the division of assets.

Child custody arrangements – If one parent is awarded primary custody, they may receive a greater share of assets to ensure financial stability for the children.

Debts and liabilities – The court will determine how to allocate marital debts fairly.

Any pre- or postnuptial agreements – If a couple has a legally valid agreement outlining property division, the court will consider its terms.

Future financial circumstances – Courts assess whether either spouse will need additional financial support post-divorce.

Since equitable distribution is determined on a case-by-case basis, judges have broad discretion in deciding how marital property is divided. The goal is to ensure a fair outcome based on the couple’s financial and personal circumstances.

Handling Marital Debt in a Divorce

Just as marital assets are divided in a divorce, so are marital debts. Generally, debts incurred during the marriage—such as mortgages, car loans, and credit card balances—are considered the responsibility of both spouses. However, courts may allocate debts based on who benefitted from them and who has the ability to pay.

For example, if one spouse took out student loans for their own education, courts may rule that they alone are responsible for repaying that debt. Similarly, if one spouse accumulated significant credit card debt for personal purchases, the court may assign that debt to them rather than dividing it equally. It’s important to work with an attorney to ensure you do not take on an unfair share of marital debt.

Protecting Your Separate Property in Divorce

If you are entering a marriage with substantial assets, or if you receive an inheritance or large gift during your marriage, there are steps you can take to protect your separate property in the event of a divorce. One of the most effective ways is through a prenuptial or postnuptial agreement, which outlines what assets will remain separate and how property will be divided in case of divorce. Having a legal agreement in place can prevent disputes and protect assets that you wish to keep separate.

Maintaining separate bank accounts for inheritance money and documenting any separate assets carefully can also help ensure they remain protected. Keeping real estate or investment properties solely in your name—without adding a spouse to the deed or title—can help preserve their separate status. In the event of a divorce, working with an experienced family law attorney is crucial to ensure that your separate property remains yours and that marital assets are divided fairly.

Know Your Property Rights in Divorce

Understanding the difference between marital and separate property is essential when going through a divorce. While marital property is typically subject to division, separate property can remain with the original owner if it has been properly maintained. However, commingling assets, transmuting property, and failing to take protective measures can complicate asset division and lead to disputes.

Hoffman Family Law helps clients navigate the complexities of property division, ensuring that their assets and financial future are protected. Whether you need to determine what belongs to you, negotiate a fair settlement, or safeguard your wealth, our experienced legal team is here to assist you. If you are facing a divorce and have concerns about asset division, contact us today to schedule a consultation. We will help you understand your rights and secure what is rightfully yours.