Every marriage has at least one topic in common – property. Whether they own a million-dollar mansion or a beat-up RV, a couple will always have to divide up the property and debt.
Certain assets remain the exclusive property of one of the marriage partners, even after marriage, and some will be divided. This is done with debts as well. Most debt incurred while married will be shared upon dissolution, though a few personal debts may remain exclusively yours.
Remember that the divorce judgment establishes the obligation between the spouses but does not change the contractual obligations of one or both spouses to the lender.
Marital or Community Property
Marital or community property is defined as assets and debts newly acquired during the marriage, either jointly or by one party, other than by a gift or inheritance to one spouse.
Most states do not have a set mathematical formula for division, and the court will determine a fair distribution based upon a combination of factors as set forth in the state’s statutes.
Non-Marital or Separate Property
Non-marital or separate property are the assets and debts owned prior to the marriage that remain unchanged, or gifts or inheritances during the marriage to one spouse (usually including gifts by one spouse to the other).
Commingled property are the assets and debts that were non-marital but which were traded in to acquire new property, repaired or enhanced during the marriage with marital funds, or non-marital debts paid with marital funds.
Dissipation is the use of marital assets or creation of marital debt by one spouse for non-marital purposes once the marriage has begun to unravel. The spouse found to have caused dissipation might be required to reimburse the marital estate.
Also known as a prenuptial agreement, a premarital agreement is the primary method of keeping separate property from becoming joint property after marriage. A premarital agreement specifies the separate property of each party, any property agreed to be joint property, and dictates how property acquired during the union will be treated as either separate or joint.
The acquisition of real estate in joint names or the transfer of existing real estate into joint ownership creates legal rights and liabilities for both parties. Real estate acquired by one spouse after marriage is generally going to be treated as marital property subject to the claims of the other party.
If the desire is not to create rights of the spouse in real estate, a marital attorney should be consulted prior to the acquisition of the property to determine if segregation of the property is legally possible.
For income-producing real estate and self-employment business assets, the creation of a business entity, such as a corporation, limited liability company or trust, can be used effectively to segregate the property. While appropriate efforts may segregate the property itself, the income form the business during the marriage – and possibly increases in value of the business property – may still be marital property.
Bank Accounts and Investments
Money is the asset that is the most difficult to track for the establishment of joint or separate assets. Like real estate, bank accounts and investments can be held individually or jointly. By placing the funds in a joint account, you are making a gift to the other party of the entire account.
The bottom line is keep the funds and accounts separate. Keeping track of every transaction is the first step in keeping segregated funds separate.
Beneficiary Status and Wills
It is always advisable to designate a beneficiary of your assets so that in the event of your death, the transfer of property will go smoothly. If you do not have a will naming a beneficiary, then state law will divide your property.
Property Ownership Issues in Child and Spousal Support Cases
If your spouse receives or pays maintenance or child support, the commingling of assets and filing joint tax returns may subject your income and individual property to scrutiny by opposing counsel and the court in reviewing your spouse’s support needs or obligation.
If you wish to attempt to keep your assets and income out of your spouse’s litigation, you should maintain clearly segregated accounts and records, including separate tax returns.