If you’re getting married soon, you’ve probably already had conversations with your future spouse about how the finances will be set up. If you haven’t had a chance to talk about it, it’s probably a good idea to have the discussion before the wedding. If you’re considering keeping your finances separate in order to protect yourself, it might be a good idea to learn a little bit more about marital property and how it’s divided in the event of divorce.
What Is Marital Property?
Marital property refers to anything property that is obtained during the course of the marriage. So, if you buy a house during the marriage, your spouse likely has an interest in that house in the event of divorce. And this is true even if only one party’s name is on the title. This is because the house would be considered marital property. But, if one party purchased the house before the marriage, the house may be considered to be separate property. This means that the other party would not have an interest in the house in the event of a divorce. However, if one party purchased the house before the marriage, but continued to pay the mortgage during the marriage, the asset could be viewed as commingled because it contains some separate property and some marital property. This is because earned income during the marriage, regardless of who earns it, is generally considered to be marital property. So if one party uses their paycheck to pay for a mortgage on a house that they purchased before the marriage, they’ve used marital property to pay for a part of the house. If a property has become commingled, both parties would have an interest in it.
What Is the Point of Separate Accounts?
Since income earned during the marriage is usually considered to be marital property, having separate accounts may not protect you from alimony, or having to pay your ex a portion of “your” money. If you have separate accounts, and your spouse’s name isn’t on your accounts, they won’t be able to see your charges or access the money in your account. But, legally speaking, the money earned during the marriage in the account is still marital property even if held in a separate account; your spouse just doesn’t have access to the money. Having separate accounts can prevent your spouse from seeing your charges or spending accessing your money. However, it does not mean that your spouse isn’t entitled to a portion of your savings account in the event of a divorce. While your name is on the account, it’s not necessarily 100% your money. This is an appropriate strategy for protecting money that was earned or obtained prior to the marriage, or was received by gift or inheritance during the marriage. Keeping these funds in a separate account to which no marital funds are deposited helps to maintain the identity of separate property. If you have an account with pre-marital funds, open up a new account to deposit marital funds. Once separate funds are brought into a marital account it’s commingled and can lose its identity as separate property. Other assets purchased and maintained by separate property funds are also separate property.
What about Debt?
Much like marital property, debt is divided during divorce. When it comes to secured debt, the debt generally goes with whoever takes the property associated with the debt. So if you take the car, you’re likely going to take the car payment too. But unsecured debt, such as a credit card, is a different story. If your spouse runs up a bunch of debt on their own credit card during the marriage, you could still be responsible for that debt. This is especially true if the credit was spent on items that jointly benefited the family. This includes items such as food, or home goods. If the credit was spent on items that solely benefited one party, that party may be ordered to pay the debt themselves. But that’s not always the case.
What Is Marriage?
It’s not just a wedding and a promise: when you marry someone, you’re financially tying yourself to them, even if you have separate accounts. With few exceptions, everything you obtain during the course of your marriage will belong to your spouse as well. Marriage may indeed be “just a piece of paper” to some, but that piece of paper is a legally binding contract. If you have concerns about financially tying yourself to another person, you do have options. In order to protect yourself in the event of a divorce, you can sign a prenup (before the marriage has occurred) or a postnup (to be signed after the marriage has occurred).
Signing a Prenup or Postnup
Prenuptial agreements and postnuptial agreements were designed to protect each party in the event of a divorce. Therefore, in order to have a good prenup or postnup, each party should have their own attorney review the agreement to ensure that neither party will benefit disproportionately. Though these types of agreements can protect you in the event of a divorce, they aren’t always 100% effective. Even if both parties agree to the terms, a prenup or postnup can be thrown out or challenged if it’s unfair. If you’re considering having a prenuptial agreement or post nuptial agreement, it may be a good idea to contact an attorney who can give you advice that’s tailored to your unique situation.
If you have questions about protecting your premarital assets or determining your property rights in a divorce, contact CoilLaw today.