Understanding Property Division: Post-Separation Earnings vs. Marital Contributions- DivorceMeKnot.com

Navigating the complexities of property division during divorce can be challenging, particularly when distinguishing between separate and marital property. Different states have varying laws regarding the classification of earnings after separation and how they relate to contributions made to marital property investment funds or pensions.

One of the most challenging aspects of our site is that it is for anyone who seeks general information related to ALL aspects of divorce, including legal information. In the case of family law, each state has separate laws used to establish the terms of each divorce. It is essential you use the information you find on our site as a means to become a more informed legal consumer and not as a replacement for legal advice. A local attorney should have the credentials in your state and knowledge of state divorce laws as they apply to you.

Talking Points

While the information below may seem simple, the complex nature of applying the laws in your state to your specific circumstance can grossly affect the outcome of your case. This article provides you with examples of basic legal information that can provide talking points with a legal advisor. It further offers foresight into the variables that can affect property division and debt allocation as part of or included in the separation and divorce order.

Knowing the laws of your state related to separation, earnings, investments and debts before you or your spouse establish a physical separation may be extremely helpful. Questions commonly asked:

Do I reside in an Equitable Distribution State or Community Property State?
How do the property laws in my state affect my case?
Based on my unique circumstances, what is the potential outcome if we go to trial and is a pre-trial recommended?
If a trial is inevitable, do you have experience arguing cases like mine before judges that could potentially hear my case?
Is a legal separation advised based on my unique circumstances?
What establishes a legal separation in my state?
What should the leaving spouse know before he/she leaves the marital home?
Should the leaving spouse take anything when they leave the marital home?
What could be considered separate and marital property based on my unique circumstances?
How do the laws in my state affect pensions, 401k's or other investments (separate or marital)?
Can separate property affect the division of marital property?

Legal-Separation Earnings as Separate Property

In states like Missouri and Texas, earnings accrued after legal separation are typically regarded as separate property. This means that any income generated by either spouse after they have physically separated is typically not considered part of the marital estate. This classification is significant, as it allows either spouse to retain and define their individual income/debts rather than divide it during divorce proceedings. This is generally only applicable when a court-order of legal separation has been established rather than when a couple establishes a physical separation (when a couple lives apart). In the case of a physical separation, there is limited precedent that the court will consider post-physical separation earnings as separate property established at the time the divorce was filed rather than the (typical) date of the court ordered dissolution.

Both states referenced above are Equitable Distribution States which means they divide and allocate marital property and debts fairly not necessarily equally.

Marital Contributions to Investment Funds

Contributions made to marital property investment funds or pensions during the marriage are typically classified as marital property. In states like California and New York, any growth or earnings from these contributions during the marriage, including until the trial or dissolution of the marriage, will be divided equitably between both spouses. Thus, the increase in value due to marital efforts is shared.

Legal Separation vs. Physical Separation

Defining separation correctly is crucial in understanding property rights. In states such as Washington and Illinois, legal separation is a formal legal status whereas the couple has a court order that establishes the separation. This may impact property classification. While a couple is legally separated, the court can establish clear guidelines regarding the management and division of assets, influencing whether earnings and contributions are considered separate or marital property. The couple is most likely physically separated as well.

In most Equitable Distribution States a physical separation is typically established on the date a couple lives separate and apart. While a couple may be physically separated, they may not be legally separated. The difference is typically established with a court order which provides clear guidelines that, among other things, define when their earnings and contributions to assets become separate property.

Legal separation can create a distinct legal framework for asset division. For instance, during a legal separation, both spouses may maintain their separate property rights on income but still manage marital debts and obligations. Therefore, any income earned during this time may be treated differently than in a simple physical separation. It may also reclassify investment contributions and their increase in value as separate property upon a court ordered legal separation rather than upon the final order of dissolution.

Conclusion

Understanding the distinction between legal separation and physical separation is vital in states that attribute post-separation earnings as separate property while recognizing contributions to marital assets. Given the discrepancies in state laws, seeking legal counsel can help clarify specific rights and obligations, ensuring both parties navigate these complex waters effectively.