Going through asset division is often one of the hardest parts of the divorce process, and one that many people dread.
But how exactly do assets get divided in divorce, anyway? What categories does each asset fall into?
The Business Professor takes a look at community and separate properties. These are the two main categories of assets, and almost all assets will fall into one or the other, barring special exemptions.
Separate properties are the assets that a person owns individually. These do not go up for division during the divorce in most cases. They may include things like gifts given directly to an individual, assets they owned before the marriage, and inheritance.
On the other hand, community property includes the assets that both members of a couple own jointly. These are the assets that will end up divided during the divorce.
Typically, community assets include things like cars, houses and land parcels. They generally involve anything that both parties spent money on, things purchased with the use of a joint bank account, and anything signed in both of the couple’s names.
Note that in some cases, it is possible for something once considered a separate property to become a community property. For example, adding personal funds to a joint bank account will change it to a community asset, and thus subject it to the same rules of division.
It is important to keep this in mind when heading into a divorce, as it can make a substantial difference in the assets up for division.