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How to Protect Your Money in a Divorce

Getting a divorce is never easy. It can be a time-consuming and costly process. This is the reason it is always important to protect your money from day one.

Income, assets, and debts acquired between the date of your marriage until separation, with few exceptions, are defined as community property. This means that generally upon dissolution they are divided equally.

However, your income, assets and debts acquired before marriage and after separation are defined as separate property, and thus it is important to protect your separate property and ensure that it is confirmed to you in your divorce.

One manner of protecting your money is to enter into a Premarital Agreement, which is an agreement that is signed prior to marriage. You may include a provision that each spouse’s income, assets, and debts acquired prior to and during the marriage will constitute his/her separate property and no community property will be created. If you are already married and wish to come to such an agreement at this time, you can enter into a Postnuptial Agreement, which is an agreement signed after marriage, and include the said terms. It is imperative to list and indicate each asset and/or debt that you wish to maintain as your separate property.

Another way to protect your separate property is by ensuring that it is not commingled with community property. For instance, if you owned a personal savings account prior to the marriage that had a balance of $50,000, you need to ensure that you do not use this as a joint savings account during the marriage into and out of which you and your spouse transfer funds. Doing so may taint the overall characterization of the account. It is best to leave your separate property accounts and assets separate from your community property accounts.

You should also make sure that you do not put your spouse’s name on title of any assets that you wish to maintain as your separate property. Please note that keeping your spouse’s name off title to your separate property may not always prevent the community from obtaining an interest in the property, however, if title remains in your name alone, you will have stronger support for your stance that this property was intended to remain yours separately. For instance, if you owned real property prior to marriage, you need to ensure that you do not put your spouse on title if you wish for this asset to be your separate property. Otherwise, there will be a presumption that because the property is owned in joint name, that there is no longer a separate property interest.

You can also protect your separate property by memorializing everything in writing. For instance, if you used the $50,000 from your separate property savings account to purchase an asset during the marriage, you can put in writing that this transfer of your separate property is not a gift to the community. Instead, indicate that the funds continue to be your separate property and that the community will need to reimburse you for the said amount in the future. By putting everything in writing, you are clarifying your intent to your spouse, and protecting your money well in advance.

Lastly, gifts made just to you, and funds obtained via inheritance, during your marriage should always be kept separate to avoid the characterization of the same as community property at the time of divorce.

Divorce and marital dissolution can be complex and if you would like to discuss ways to protect your money in more detail, please contact the experienced attorneys at Bremer, Whyte, Brown & O’Meara LLP for a consult.