What is considered separate property in a divorce?

retirement accounts in divorce
separate property in a divorce

I often have clients come in who are misinformed about separate property and which assets should be divided in their divorce. Since I'm in Ohio, I will use that as my example. Ohio is an equitable division state. That means that a couples' marital assets are divided equitably in a divorce. It's important to note that equitable is not always equal but I will come back to that in another post. The question, however, is what constitutes a marital asset. All else would be considered separate property.

Pensions in Divorce

I hate gender stereotypes but I see this all the time so I think it is worth calling it out. I have never once had a man come into my office and say, "She can keep her pension, she earned it" while I frequently hear from female clients, "He can keep his pension, he earned it." I'm hoping others working in the divorce field have not had that same experience.

The pension is commonly the largest asset of the marriage.  If all or a portion of the pension was earned during the marriage then all or a portion of it is considered to be marital property. If some of the pension was earned prior to the divorce, that part would be considered separate property. That means, at a bare minimum, you should get the information that you need to determine the value of the pension and/or the benefit terms. Remember, knowledge is power. It does not mean that you have to "take" half of his pension. It just means that it can be a very large asset that is worth of considering when negotiating your settlement.

Dividing a 401-K in a Divorce

What about a 401-K? The account is set up in my name at my company so it must be my separate property, right? Not necessarily. If all or a portion of your 401-K was earned during your marriage then all or a portion is considered marital property. If a portion of the 401-K was earned prior to the marriage, you might be able to make the case that it's separate property but you'll need some documentation to do so. If you think this might be an issue in the future or you just want to be on the safe side, hold onto those financial statements.

With proper documentation, separate property can be traced even if it's held in an account with marital assets. The tricky part is that the burden is on the person trying to prove that it's separate property so again, save that documentation. It becomes harder to request at a later date as companies merge and/or change 401-K providers.

Is an inheritance considered separate property?

Most people think this one is pretty cut and dry. If the money was inherited, it's separate property. However, it's really not that simple. If the money was inherited and maintained in a separate account then it's pretty straightforward. However, if the money was commingled with marital assets, which is often the case, it's a whole different ballgame. Again, if the property can be traced, you can make the case for it as separate property.

What about the money and things I had before we got married?

"Things" might be simple if you owned them outright when you got married. In other words, if we are talking about a house, you were no longer paying on your mortgage during the marriage. However, I will probably sound like a broken record if write about being able to trace the property to be able to claim it as separate property. For instance, did you use $50,000 for a down payment on your home with money you had prior to your marriage? You would probably be able to exclude that $50,000 as separate property. But what about this scenario? Did you take that $50,000 and move it into joint ownership in a bank or investment account? If you cannot trace it as separate, then it's marital.

What about that $10,000 my grandfather gifted to me?

I'm hoping by now you get the picture and you already know the answer to that. Just in case, it depends on what you did with that $10,000. If you maintained it as separate property (e.g., put it in a bank account in your name or bought something specific with it) then you can claim it as such. Gifts received from a third party, even when you are married, are considered separate property. Make sure the check is made out to only you (and not to you and your husband) and you do not commingle it with your marital assets.

How do I trace my separate property?

You have come to the right place! A qualified Certified Divorce Financial Analyst (CDFA) or Master Analyst in Financial Forensics (MAFF) can help you or your attorney with a separate property tracing. This is one of the benefits of using a Financial Neutral for your mediation rather than a traditional mediator. A Financial Neutral will most likely have the necessary training to conduct your separate property tracing so that you do not have to involve another professional.

What about debt?

I will save this for another blog post as there is quite a bit that can be discussed. The short version is that it's handled similarly to marital vs. separate property. Debt accrued during the marriage is considered to be marital debt and both parties are equally responsible for it. As I said, it's a little more complicated than that so I will save that for another day.


Please note that divorce laws vary from state to state. Great Lakes Divorce Financial Solutions does NOT provide legal advice and nothing on this website should be construed as legal advice. For legal advice, contact an attorney who works in your jurisdiction.

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