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prenuptial agreement

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.

Feb 17

The Difference Between Equitable and Community Property Division

Equitable and Community Property Division Rules Are Not the Same

More than 700,000 Pennsylvania residents are divorced. This state operates under equitable property division guidelines in divorce proceedings. A spouse who assumes that he or she will automatically walk away with a 50/50 split of marital property is mistaken.

Property Division Rules Vary by State

Divorce laws vary by state. There are currently 41 states that operate under equitable property division guidelines and nine states that use community property rules. In every state, marital property and marital debt refer to assets or liabilities spouses have acquired or incurred during the marriage.

A family court judge overseeing property division proceedings will determine how marital property and marital debt should be split between spouses to settle a divorce. A divorce lawyer can help a concerned spouse protect his or her financial interests in court. Certain divorce-related topics can make property division more complex, such as if spouses have children together and must determine whether they will continue to live in the marital household and, if so, who will live with them as well as who will pay for maintenance and upkeep of the home.

How Equitable Property Division Differs From Community Property Rules

Business partners typically possess shared ownership interests in the assets of their company. If they dissolve their partnership, it is common to divide assets and liabilities between them. It is similar in divorce, meaning that neither spouse has an exclusive right or responsibility to any asset or debt accrued during the marriage. In states where community property division rules apply, all marital assets and debts are equally split, 50/50, between spouses in a divorce. In Pennsylvania and other equitable property states, the division of marital property must be fair but not necessarily equal.

A judge ruling on property division issues in an equitable property state determines how assets and debts should be split so that each spouse receives a fair portion of the overall value of the total assets and the amount of debt to be paid.

Establishing Separate Property Ownership

If spouses signed a prenuptial agreement before their wedding day, it is possible that certain assets or debt have legally been assigned separate ownership or liability to one spouse or the other. Certain issues, such as an inheritance that is designated for one spouse only, may also not be subject to property division in a divorce. Intended spouses can use a prenuptial contract to protect assets or avoid a liability, such as a future spouse’s college loan debt, in case a divorce takes place at some point; this is true whether the state in question has equitable or community property rules.

Equitable Property Rules Enable Asset Trading

In order for a Pennsylvania family court judge to determine a fair division of assets, spouses must fully disclose every asset or property they own. In some cases, it’s possible for spouses to agree to trade assets, meaning they agree to exchange the value of one asset for another. For instance, a car cannot be physically split in two; however, spouses might agree to exchange the value of a car for the value of another asset. Another example might be if a spouse wants to keep the marital home and is willing to exchange his or her value portion of a vacation property or other assets in order to do so. A divorce lawyer can make recommendations to a client regarding specific asset value issues.

Seek Clarification of State Laws Before Heading to Court

Divorce isn’t easy, but it’s often possible achieve a fair settlement and move on with life even if some issues are more complex and challenging to resolve than others. Regarding equitable property division versus community property division rules, it’s critical to understand the difference and to know which laws apply in a specific set of circumstances. If a person lacks knowledge about equitable division guidelines and heads to court assuming that he or she will automatically get an equal portion of assets in a divorce, discovering that this is not necessarily true may have a significant impact on his or her settlement and post-divorce financial status.

It’s always best to act alongside experienced legal representation in court because a family law attorney can protect a client’s rights and financial interests, especially during property division proceedings. If you’re concerned about property issues as you prepare for a Pennsylvania divorce, reach out to a Jenkintown divorce lawyer by calling (215) 886-1266.

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