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The Difference Between Separate Property & Community Property

Because marriage entails the merging of finances and assets, property division can be one of the most complex and contentious matters in a divorce. This is especially true when spouses have various types of assets, jointly owned businesses, real estate, debt, high net worth, and other financial issues that need to be addressed. Even in cases where assets may seem straightforward, they are often not. This is why it is widely advised, even by the New Jersey Court system, that divorcing spouses seek legal assistance when determining which property and assets belong to whom in order to navigate the property division process and avoid costly mistakes.

Because New Jersey is an equitable distribution state, it calls for the fair, but not necessarily equal, division of assets and debts. Whether spouses reach property division agreements through communication and negotiations or take their case to court, one of the most important issues they must address is determining what property is subject to division during divorce.

Because it isn’t always easy to distinguish community property (which is subject to division) from separate property (which is not), understanding how the law defines these terms is critical to gaining an understanding of what will likely be shared and divided in your unique case. Unless there are terms established in a prenuptial agreement, property will be divided based on how certain assets are classified:

  • Community Property – Assets, property, and debt acquired during the course of a marriage are considered community property under New Jersey law. These commonly include homes and vehicles and other physical assets, provided that they were not a gift or inheritance. Because income earned during a marriage is also considered community property, anything purchased with funds earned during a marriage is considered community property. Retirement accounts and pensions are also subject to division during divorce.
  • Separate Property ­– New Jersey defines separate property as anything acquired and owned prior to a marriage, any profits earned from separate property, anything purchased using separate property, and anything acquired after the date of separation, including income. Gifts and inheritances, whether they were acquired during a marriage or not, are also considered separate property. Separate property is owned by one spouse and is not divided in divorce, but there are often circumstances where separate property may become community property.

It is important to note that separate property can become community property during the course of a marriage. This can happen for a number of reasons, such as when spouses use their income and assets to contribute to the upkeep of a marital home, purchase vehicles together, deed a formerly separate property home into both spouses’ names, or otherwise co-mingle separate and community funds or assets. Tracing community property back to separate property can be a challenging task that demands the attention of experienced attorneys.

Property division matters often involve detailed financial investigations, as contention over whether or not property can be considered separate is typically the biggest issue at hand. By leveraging our resources and compiling evidence, we assist clients in establishing how property should be classified in their case, with their best interests in mind, and work to secure the resolutions they need through out-of-court negotiations or trial when necessary. To discuss your case with a member of our team, contact us today. Consultations are free and confidential.