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How Courts Decide What Counts as Separate Property

One of the big questions of divorce is how to pay for the costs of ending the marriage, and more importantly, how does one weather the financial implications of losing both assets and income? The largest factor for many couples in this equation is property division, as this issue will determine what cushion, if any, a former spouse may tap into if other sources of support are insufficient. The particulars of property division differ in each case, but the basic rule is that all marital property, including debt, should be divided according to what is equitable or fair. In Indiana, all property owned by either spouse, regardless of when acquired, is presumed to be marital and subject to division. This presumption can be rebutted with evidence certain assets or liabilities are unconnected to the marriage and should be treated as separate. If property is classified as separate, it remains with the spouse listed as the legal owner, and is not included in the marital pot. The more property designated as separate, the less there is to divide, so this issue becomes quite important.

An Indiana court of appeals recently considered how to approach separate property in a case concerning the division of a retirement account, and found that judges must consider all five factors that control property division, and not just a few, as the trial court in this case did. This case illustrates how pivotal the division of a single asset can be to the outcome of a case, and a discussion of how courts assess what is fair, and the types of property typically viewed as separate, will follow below.

Factors Controlling Property Division

As noted above, property settlements issued by a court are required to take into account the equity of any possible arrangement. In addition, the presumption is the marital estate should be divided equally, which is related to the presumption that all property is assumed to be marital. Thus, this premise may also be rebutted, and is related to what is revealed when the judge assesses the five factors that are supposed to control these decisions:

  • How much each spouse contributed to the acquisition of property;
  • How much property was acquired before marriage or via an inheritance or gift;
  • The financial circumstances of each spouse at the time the property division would become final;
  • How either spouse conducted themselves in regard to acquiring or wasting property; and
  • The earning capacity of each spouse.

These factors are supposed to help the judge determine if a deviation from the equal division of property is necessary, including whether some property should be excluded from this decision. In addition, judges often look at which spouse will have primary parental responsibilities and if spousal maintenance will be paid.

What is Considered Separate Property?

Indiana’s definition of marital property is broader than other states’, as it automatically includes all property owned by either spouse, regardless of when or how acquired. It puts the burden on the spouse seeking to exclude assets to prove they are not connected to or have not benefited from the marriage. Generally speaking, courts tend to limit classifying property as separate for purposes of property division to the following types:

  • Inheritance or gifts received during the marriage that are solely held in the name of one spouse that receive no contribution or benefit from the other spouse or marital funds; and
  • Property owned by a spouse prior to marriage that was not commingled with marital property nor had an involvement from the other spouse.

Note that gifts between spouses do not fall into this category, as only gifts from third parties may be designated as separate.

Get Legal Advice

Do not settle for what your spouse offers, or what you hope the court will give you. To protect your interests and get the right outcome, you need to work with an experienced divorce attorney who can advocate on your behalf. Christopher L. Arrington, P.C. knows the ins and outs of divorce law that will affect your case, and can offer you the best available options to address your situation. Contact the Danville law firm to schedule an appointment.



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