Property division can be a serious point of contention when couples get divorced. Here in New York, marital property is divided in a fair and equitable manner while an individual's separate property remains theirs wholly. The wrinkle is that couples who bring their separate assets into the marriage often end up commingling them, which turns that house your spouse moved into or that car loan that was paid from a joint account into marital assets that are to be divided.
It takes some vigilance on the part of the couple, but there are some ways to protect those separate assets to ensure that they remain in sole possession of the original owner.
Couples should consider the following:
- Draft a prenuptial or post-nuptial agreement that outlines which assets will remain with the original owner.
- Maintain accurate financial records that prove certain asset or assets were not commingled.
- Be aware that the increased value of an asset can be considered a marital asset that is shared upon death or divorce, especially if that asset is actively maintained (examples would be making improvements to a rental property or actively trading stocks).
- Use income from non-marital assets to purchase separate assets rather than marital assets.
Mistakes to avoid
It may seem like a good idea, but couples should avoid:
- Paying marital debts with separate funds
- Depositing money earned during the marriage in accounts set up as separate - this commingles the account
- Opening joint accounts using separate funds - those separate funds become commingled
- Assuming that a business owned before the marriage stays separate -- contributions by a spouse or increases in value can make it a marital asset
Couples can find their own solutions
Those who plan to divorce will need to create a comprehensive list of all assets and review any agreements drafted before or during the marriage. This can provide a solid foundation for determining a fair and equitable distribution of marital assets and outline those funds or assets that were not mingled. Disputes or marital assets and other issues will likely happen during the process, so a knowledgeable family law attorney can help find a solution, often before subjecting the matter to the cost and stress of court litigation.