What Assets Are Protected From Divorce Settlements?

During a divorce, the court will divide all marital assets as equitably as possible, and it may require you to turn some of the property in your name over to your former spouse. However, certain assets may be exempt from the proceedings. Which assets are exempt, if any, depends on your circumstances and the laws in your state.

Each state publishes laws that determine how marital property should be divided during divorce. Two primary types of divorce laws are in effect: community property law and equitable distribution. In community property states, the court considers most property acquired during the marriage to belong equally to both spouses, regardless of which spouse acquired it. In equitable distribution states, the court considers the origin of each asset when determining the rightful owner. At the time of publication, community property states include Wisconsin, Texas, Nevada, Washington, New Mexico, Louisiana, California, Idaho and Arizona.

In community property states, all property acquired directly by either spouse is community property, and the court will divide it equally during the divorce. However, any property that either spouse acquired prior to the date of the marriage is exempt from the division. Likewise, property that either spouse acquired through an inheritance is also exempt from division during divorce. Furthermore, spouses can exclude any income a separate asset earned from the divorce, even if the income accrued during the marriage.

In equitable distribution states, an asset may belong equally to both spouses, to only one spouse or to both spouses in unequal portions. In general, assets one spouse acquired before the marriage are exempt from division, unless the owner willfully added them to the marital assets. For example, if a spouse who owns a home prior to marriage but puts his new wife's name on the deed, the home becomes marital property. Likewise, if both parties deposit the funds they had prior to the marriage into a joint bank account, the funds are no longer exempt from division during divorce.

In equitable division states, courts won't necessarily divide non-exempt assets in half. In fact, if the court determines that one spouse acquired a given marital asset with little or no help from the other, it may award most of the asset's value to that spouse. Regardless of state law, prenuptial agreements and settlement agreements made between the two divorcing spouses can alter the division of property.