Pros and Cons of Keeping Separate Property Separate

[01.22.2021] Virginia classifies property and debt during a divorce as either marital property and debt, separate property and debt, or a mix (or “hybrid”) of both. Your actions during the marriage and separation period significantly impact the property’s status and the benefits or detriments that may come from a property determination. Hiring an experienced Virginia divorce attorney can be beneficial when understanding how your property is classified. 

Benefits of Keeping Separate

Arguably the biggest benefit of keeping your separate property separate is that if your marriage begins to deteriorate and divorce is imminent, your soon to be former spouse has no claim on that property in most instances. After the divorce, it will generally remain all yours. When it comes to a separate debt, the benefit is avoiding having to pay toward your former spouse’s debt they may have incurred before the marriage or having to count on your former spouse to cover a debt on which you have responsibility. Another benefit is that if property and debt have truly been kept separate, it might streamline the divorce process by taking assets or debts each side could argue about off the table.  

How to Keep it Separate 

If you decide to keep your property separate, you have to make sure it is actually kept separate. The key to keeping your property separate is to avoid mixing or “commingling” the separate property with marital property. An example may help with this concept. 

Imagine a savings account you have had for many years before the marriage. On the date of marriage, you have $10,000 in the account. As of the date of marriage, the entirety of the account is your separate property. During your marriage, if you do not deposit any of your paychecks into the account or contribute to it, the bank account will still be your separate property even at the divorce. Your former spouse will not be able to claim an interest in the account.[1]

Conversely, let’s say that as the marriage progresses, you deposit your paychecks into the account, and you and your spouse have access to it. In this case, the account will likely lose much, if not all, of its separate nature; it will be considered a marital account and subject to division. Even if there is still $10,000 or more in the account at the time of divorce, the court will not be able to determine if that $10,000 was your “original” funds or a mix of pre and post-marital contributions.  

Another example is a retirement account in place at the time of the marriage. As opposed to a general savings or checking account, there is less risk that the retirement account will be drawn down during the marriage. However, that may still happen, and it is more likely a party will continue to contribute to it during the marriage. Similar to the bank account above, suppose you no longer contribute funds to this account during the marriage and just let it sit there. If a divorce does occur, this account will be your separate property, and your spouse will generally not have a claim to it. However, if you continue to contribute to the account during the marriage, the account will become “commingled” and hybrid property that is part marital and part separate. Your spouse would now be able to claim the account as at least partially marital property, and he or she is entitled to a portion of the funds. 

Your situation may vary from the examples above, which is why it can be reassuring to have a Virginia divorce attorney you trust go over the details in regards to your specific circumstances.

Detriments of Keeping Property Separate 

As described above, it can be challenging to keep your premarital assets and property totally separate during the marriage. Marriage is an economic partnership, and there are assets and other property that might become mixed or marital property regardless of the precautions taken. 

One detriment to keeping property entirely separate is that it can be complicated. You will have to make sure funds are directed to the proper accounts and avoid transferring any funds that may be marital or belong to your spouse into that separate account. You might have to set up entirely new accounts and lose benefits that may be grandfathered into your separate accounts.  

An additional detriment is if both parties keep their assets entirely separate, you may lose the ability to claim an interest in your spouse’s accounts or property that could be lucrative. If your spouse has a large bank account coming into the marriage, and during the marriage, those funds are used to assist the family, and both parties have access to the account and may even deposit funds into the account, at the divorce, you will have a potentially significant claim to funds that remain in the account.  

When it comes to debts, the same concept applies. Ultimately, the decision to keep debts and assets as separate property during the marriage or not is a decision based on facts unique to each person and couple. As discussed above, there are benefits and detriments to both paths.

[1] There are exceptions to this. If you deposit other separate property into that account, the account would likely still be your separate property. You could also withdraw money from the account and use that money on you or your spouse, and the account would remain separate.

If you need assistance with your Virginia divorce, contact WhitbeckBennett by calling 800-516-3964 or by emailing clientservices@wblaws.com.

Related: Divorce