Protecting Separate Property
In a divorce all property will be presumed to be community. If there is a dispute about whether property is separate or community, the party who is alleging it is separate has the burden to prove it is his or his separate property. Separate property is all property brought into a marriage by one of the parties and any gift or inheritance solely to that party during the marriage. It is important therefore, to keep separate property separate so that it is easy to prove in the event of a divorce. For example, if you receive a gift or inheritance of cash, you should keep it in a separate bank account. If you invest it in something like a stock, bond or mutual fund it should be in the name of the party it belongs to. If you put your spouse on the account or have your spouse as co-owner of the investment then it will make it more difficult to prove it is your separate property. Your spouse may even have an argument that you transmuted it to community property by gifting it to the community. If you use some of this cash to pay a down payment to purchase a home and then use community funds pay the mortgage, you have created an asset that is part separate and part community. To protect the separate property portion of the asset you will need to be able to trace the separate property money you used to pay the down payment. This is sometimes easier said that done. It is wise to have the other party sign something acknowledging the separate property contribution you made to the down payment. If you have significant separate property prior to marriage it is wise to consider a pre-nuptial agreement. If you are gifted or inherit significant separate property during a marriage you could consider a post-nuptial agreement as a way of protecting your separate property.