When couples divorce, their marital property is subject to equitable distribution. Generally, marital property is property that is acquired after the parties’ wedding date and up to the date upon which a divorce action is filed. Separate property is property that is either acquired before the parties marry, as a gift specifically to one party of the marriage, or through an inheritance during the marriage. Absent specific circumstances, separate property exclusively belongs to the spouse owning the property and will not be split if the couple divorces. However, it is possible for a spouse to inadvertently convert separate property into marital property.
Some common examples of this are a spouse who puts an inheritance into a joint bank account or, keeps the funds in a separate account but periodically withdraws and deposits money into a joint account to pay marital expenses. Any portion of the money used for marital expenses becomes marital property, although anything remaining in the separate account is still considered separate property. That money which is in a joint account is converted into marital property.
One way to protect separate property is to ensure it is not accessible to the other spouse. However, this may not always be practical. The better way to preserve separate property is through the use of a prenuptial or post-nuptial agreement. Prenuptial and post-nuptial agreements are used to help couples address financial issues that may arise during their marriage and in the event of divorce, separation or death. A prenup is entered into before the vows are exchanged, while a post-nup is signed during the marriage. The benefits of these agreements include the parties ability to specify what income, assets, and debts will be “separate” as opposed to “joint” instead of the law deciding.
A prenup or post-nup can be used in many situations including to protect inheritances, children from prior marriages and large income-disparities between the parties. It may also be helpful in limiting the liability of one spouse for the other party’s separate debts.
While these agreements can be an effective tool to resolve financial matters, it is essential that they are carefully negotiated and vetted by an attorney for each party to ensure there is equitable distribution and it addresses the needs of each spouse.
If you are considering a prenuptial or post-nuptial agreement, please contact us to find out how we can help.