Lately, I have been receiving questions about how one spouse can protect assets they bring into the marriage or separate property. The answer is not always clear at first, as it requires an investigation into how the property was held throughout the marriage. Clients do not like to wait until after an investigation and analysis to learn whether or not their pre-marital property is protected from the other spouse’s claims. Here are some tips that you can take to maintain the classification of your pre-marital property as separate property, not subject to division in a divorce action.
DO NOT ADD YOUR SPOUSE’S NAME TO YOUR PRE-MARITAL BANK ACCOUNTS, DEEDS OR TITLES.
When you add your spouse’s name to accounts, deeds, or titles you had before marriage, you change how the property is owned. Once your spouse’s name is added to the property, it becomes owned jointly between the two of you. If you want your spouse to inherit the property upon your death, designate them as the beneficiary or the person to whom the title will transfer upon your death.
DO NOT DEPOSIT INHERITED MONIES INTO MARITAL OR JOINT BANK ACCOUNTS.
If you receive an inheritance, your spouse is not entitled to any portion of those funds unless you commingle the money with funds held jointly or earned during the marriage. Any weekly paycheck deposited into your separate bank account is classified as marital, as the pay is earned during the marriage. If your bank account was held in your name before marriage, open a new account for your paycheck after marriage. By preserving the pre-marital bank account’s classification as separate, you are able to deposit the inherited funds directly into this account. However, if you added your spouse’s name or deposited your weekly paycheck into the account, open a new bank account in your name alone to hold these funds.
DOCUMENT HOW THE MONEY FLOW.
When the pre-marital property is sold during the marriage, it is key to document where the funds were deposited, what they were spent on, and whose name is on the account. This is called “tracing.” If we can trace the funds used to acquire property during the marriage to separate pre-marital funds, then your spouse may have no claim to the new property acquired during the marriage.
KEEP CLEAR AND ACCURATE RECORDS.
One of the biggest struggles I have discovered is tracing how the property was acquired. A spouse may claim that the property was purchased with funds realized from selling a separate property or funds gifted from parents. However, there is no clear trail of where the funds were deposited and where the funds came from to purchase the property in question. If you can prove how the funds flowed through the accounts, you can show how to properly classify the property as either pre-marital and separate or marital. If you contributed toward your spouse’s separate property’s maintenance, repair, or improvement, create a paper trail showing what the monies were used for and how much.
SHARE YOUR RECORDS EARLY ON WITH YOUR ATTORNEY.
One of my biggest pet peeves is finding out from my client at mediation that the property in question was owned before the marriage. Sometimes, I learn that my client knew their spouse owned the property before the marriage. Tell your attorney when the property was acquired and if it was separate. If you know the property became commingled with marital property, provide your attorney with the documents that prove this happened early on.
CREATE A PRENUPTIAL AGREEMENT.
If you are worried about your property being seized by your soon-to-be spouse, create a prenuptial agreement that clearly states what each spouse owns before the wedding day. This agreement should state how the property will be treated upon death during a divorce. Note that if you are presented with a prenuptial agreement, take it to an independent attorney to review to ensure that the terms are fair and equitable.
It is best to use these tips from the first day of marriage. However, if you are learning them, start compiling the records now. If you need help in analyzing your property or want to learn how to protect a specific piece of property, contact Melissa Pearce and Associates, PLC, today. And visit our YouTube channel for more information on co-parenting, communication, and more.