Characterization of Property upon Divorce

When a married couple divorces, the way property is distributed between the former spouses depends on the characterization of the property. The laws governing characterization of assets will differ from state to state, but they are similar in basic ways.

States may follow the characterization principles either of equitable distribution or community property.

For distribution purposes, property may be characterized as either non-marital property or marital property (also called "community property" in some states).

Non-marital Property

Non-marital property, or "separate property" is property that is entirely owned by only one spouse. It will be distributed to the owner in full upon divorce. The following types of property are usually characterized as separate property:

All of these are characterized as separate property and will be distributed to the owner of the property upon divorce. So for example, if during marriage the husband received a car that was given to him as a gift, the court will characterize the car as separate property, and only the husband will own the car upon divorce.

Depending on the jurisdiction, some courts will also characterize the following items as separate property:

Marital Property

Marital property is property that is owned equally by both spouses. It will be distributed equally between the two parties upon divorce.  In community property states, it is referred to as "community property". The following items are typically characterized as marital property:

As you can see, non-marital property can be converted into marital property in some circumstances, and vice-versa. This is called "altering the characterization".

More Marital Property Characterizing Techniques Used by Courts

In determining whether property is marital or non-marital, courts will sometimes trace back to how the property was acquired. A basic technique used in tracing is identifying the source of the property, i.e., the funds that were used to obtain the property. If the property was acquired using wages earned during marriage, it is likely to be called community property. Tracing back to funds is usually used only if the characterization of the property cannot be determined otherwise.

Another general guideline courts use is determining the intent behind the acquisition of the property item. For example, retirement benefits or severance pay might be characterized either way depending on whether they were intended to replace separate or community earnings.

Sometimes courts will also consider the management and control of the property in question. If one spouse has demonstrated exclusive management or control of property, it will likely be characterized as separate property. It will be distributed to the spouse with exclusive control. This is usually applied in dealing with major assets such as a business or real property.

Differences between Equitable Distribution and Community Property States

Equitable distribution states and community property states operate in the same basic manner, with one major exception: community property states begin their characterizations with the presumption that all property that is acquired during marriage is community property.

A "presumption" means that the other party must prove that the item is not community property if they wish to claim sole rights to the item. This is called "overcoming the presumption" and can be done the following ways (again, depending on jurisdiction):

On the other hand, in an equitable distribution state, courts do not make the above presumption and instead divide assets according to various factors. These factors may include the earning capacity of each spouse, and how much the property has benefited the marriage. "Equitable" means fair or equal, and thus courts try to make the division as fair as possible.

List of Community Property States

States that follow community property principles are called "community property states". 9 of the 50 states are currently community property states:

The rest of the states follow principles of equitable distribution.

Quasi-Community Property

Some states include a third characterizing category, which is called "quasi-community property". Quasi-community property is property that is acquired during marriage in an equitable distribution state that would be categorized as community property in a community property state.

This category comes into play when the couple acquires property during marriage in an equitable distribution state, but then moves to a community property state. Quasi-community property is usually treated as separate property while the couple lives in the community property state.  However, upon divorce, it is treated as community property and is divided accordingly.      

Points to Consider

To recap, here are major points to consider regarding characterization of property upon divorce: