Law Office of Joanne Kleiner

Archives for March 2022

Mar 07

The Key Differences Between Separate and Marital Property

How to Classify an Asset for Property Division Purposes

You may believe that you are at risk of losing half your belongings if you leave your spouse. However, this isn’t necessarily the case. Instead, you generally only risk losing a portion of the assets held inside of the marital estate.

What Is the Marital Estate?

Generally speaking, any assets that are acquired during a marriage are considered to be part of the marital estate. This may be true even if only one person’s name is on the deed or title to the asset. For instance, if you buy a home with your spouse, you generally have an ownership interest in that home even if it is held in your spouse’s name.

It’s also worth noting that price appreciation that occurs in a separate asset after marriage becomes official may be part of the marital estate. For instance, let’s say that you own a home that is worth $100,000 on the date of your wedding. Let’s also say that the home is worth $200,000 when your divorce becomes official.

Your spouse will likely be entitled to a portion of the $100,000 in price appreciation that took place while you were married to them. It’s worth noting that they would be responsible for paying capital gains taxes on any profits that they received from selling a joint asset obtained in a divorce settlement.

What Is Commingling?

Commingling can occur in several different ways. For example, if your spouse deposits money into your personal bank account, that asset may now be considered joint property. The same may be true if your spouse used their money to make repairs to your home, car or other property. Separate assets may become joint assets because you failed to keep accurate records of when they were acquired and who paid to obtain or maintain them.

Tips for Retaining Control of Property After Getting Married

The use of a prenuptial agreement may make it easier to exempt property from being distributed to your spouse in a divorce settlement. Such an agreement may stipulate that your business, home or other property is to be classified as separate property. A divorce lawyer may be able to help you draft a prenuptial agreement that is likely to hold up under scrutiny.

If you aren’t able to create such a contract before your wedding takes place, you can draft a postnuptial agreement after your marriage becomes official. Regardless of when this type of agreement is executed, it’s important to allow your spouse to review it with their own attorney. This may help to ensure that the document won’t be invalidated based on a claim that it was signed under duress.

Putting assets into a trust may also be an effective way to retain control of them after a divorce. In most cases, property held in a trust is considered to be kept outside of the marital estate. Of course, your spouse may challenge the validity of the trust, and it’s possible that a judge will nullify it in the event that the document is not structured properly.

Certain Assets Won’t Automatically Become Part of the Marital Estate

If you received an inheritance while you were married, it remains a part of your separate estate. The same is true of anything that you received as a gift from your spouse, a friend or a family member. Of course, these items can become joint property if they are commingled, which is why it may be best to keep them in a separate account or place them in a trust.

If you need the assistance of a divorce lawyer, you’re encouraged to contact the Law Office of Joanne Kleiner at your earliest convenience. You can call our Jenkintown office by dialing (215) 886-1266, or you can fill out and submit the contact form located on our website.

Mar 03

How Do You Divide Retirement Benefits After a Divorce?

Who Gets the Retirement Account in a Divorce?

Asset division is one of the most common reasons for disputes during a divorce. If you want to make things a little easier, it’s helpful to understand how retirement accounts are divided during the process.

Are Retirement Accounts Joint or Separate Property?

During a divorce, the main question about any asset is whether it is personal property or marital property. If the retirement account is separate, personal property, then the original owner of it retains control. If the account is a marital asset, it and other types of joint property all have to be split up.

The basic rule for determining what counts as joint property is in part when the property was acquired. Accounts started after marriage are usually marital property. If the account was started before marriage but either spouse contributed money to the retirement account following marriage, a proportionate amount of the account becomes marital property.

A retirement account is usually only personal property if you quit adding funds once you got married. Some types of prenuptial arrangements can also mean that certain retirement accounts remain personal property regardless of whether money is contributed after marriage.

Different Types of Retirement Accounts Are Handled Differently

To figure out how to fairly split retirement accounts in a divorce, you need to pay close attention to the retirement account type. For a traditional IRA or 401(k), it is simple. There are some basic formulas your divorce lawyer can use to quickly estimate how much you contributed and how the property should be divided.

Things get more challenging with defined benefit plans like pensions. These involve an employer providing their employee with a certain amount of money at retirement, and the amount the employee gets is based on how long they work there. Since there is no way of knowing how long a person will continue to be an employee, your lawyer will have to just roughly estimate the value.

Strategies for Dividing Retirement Accounts Fairly

Whenever you are handling retirement accounts in divorce, it is a good idea to be flexible. For many couples, the simplest option is just agreeing that each party keeps all the funds of the retirement account in their name. However, this isn’t always a fair or possible option. Another common choice is offering a cash payment in exchange for complete control of an account. For defined benefit plans, the court along with the plan administrator will require a Qualified Domestic Relations Order. This allows the spouse who doesn’t own the plan to get a certain amount of the plan benefits.

It is also possible to divide the retirement account into two new retirement accounts that each contain a certain proportion of the funds. You could ask to retain control of a retirement account in exchange for other perks. For example, one spouse could take the retirement account while another takes the house. You could even negotiate a lower alimony payment in exchange for a retirement account.

How to Resolve Retirement Account Division Disputes

In an ideal world, you and your ex-partner would be able to quickly and easily find a mutually-satisfactory way to divide up retirement accounts. However, if you and your ex cannot come to a quick agreement on your own, your divorce lawyers can try negotiating. You can send offers and counter-offers to your ex that suggest different asset division strategies.

If this does not work, it might be time to get a neutral party involved. Many people are finding that a mediator can help settle disagreements in a mutually satisfactory way, or you can get a judge to divide the accounts in court. Though there is no guarantee that things will go in your favor, having a judge decide how to divide your retirement accounts can settle arguments once and for all.

Interested in learning more about retirement account division? The Law Office of Joanne Kleiner is here to help Montgomery County residents with their divorces. Call 215-886-1266 or send us a message to arrange a free consultation.