Understanding the division of assets in divorce is a good step to take in order to reduce some of the stress and friction related to divorce itself.
For example: what category do assets fall under in the first place?
Separate and community property
The Business Professor discusses community versus separate property. These are the two main categories that assets fall under during divorce.
Separate property is the property that each party will keep to his or herself. They do not have to worry about sharing this with their partner in most – but not all – cases.
On the other hand, community property is the property shared between both parties. They will have to divide this property in an equal or equitable way based on how their state chooses to do it.
Separate property usually includes things like inheritance, gifts given directly to the person, and anything that they owned before the marriage. Community property often includes things like houses, cars, properties, and anything made as a joint purchase or through a joint bank account.
This is also how some separate property may come to fall under the category of community property. For example, if a person inherits a sum of money and deposits that money into a joint bank account co-owned by their spouse, then this sum of money becomes jointly owned and counts as a community asset.
This is why it is important for people to understand asset division well before the possibility of divorce crops up. It is an important step to good financial health.