When contemplating divorce or preparing to get married, it is important to make sure your separate assets are preserved. Assets acquired between the date of marriage and date of separation are presumed to be marital, unless they meet certain exceptions. Those exceptions include, but are not limited to, gifts from third parties and inheritances. Marital assets are subject to distribution in a divorce. Separate assets are retained by the spouse who owns them, and are not subject to distribution in divorce. Here are four steps you can take to protect your separate assets from equitable distribution.

1. Document the value as of date of marriage:

Anything you own prior to marriage is your separate asset. If the asset increases in value during the marriage, the increase in value is marital pursuant to the divorce code. You must be able to show the value of the asset on or around the date of marriage to preserve the premarital value as your own asset.

This can be difficult in long marriages. Banks and other businesses often only retain documents for a specific number of years. If your marriage is longer and you did not save documentation of the value of your separate assets, it can be tricky to prove the value at marriage. If you are contemplating marriage or divorce, locate documentation establishing the value of the asset as of the date of marriage and keep the document in a safe place. You might want to email electronic copies of documents to yourself, save them to the cloud, or store paper copies with a trusted friend.

If a bank or other business no longer retains records from the time you were married, start searching old emails, file cabinets, and other places you store documentation, to look for proof of the value. Talk to your financial planner to see if he or she can provide proof of the value of the asset as of the date of marriage. Discuss the specific type of asset with your attorney, he or she may have pointers on how to value a specific asset. For example, appraisers can be hired to value a residence, stock prices can be researched because they are public record, and vehicle values can be researched.

2. Keep your separate assets in your sole name

If you add your spouse’s name to a pre-marital asset, you then gift the asset to the marriage. That means you lose any separate interest in the asset, and it is now marital. One common mistake is when spouses refinance a mortgage and they change the deed on a residence from the sole name of one spouse into the joint name of both spouses. If the residence was purchased prior to marriage, a portion of the value of the residence may have been protected from division during a divorce. This protection is lost upon the transfer of the deed into joint name.

This can also occur when transfer investments. A transfer of investment funds from one account to another does not change the marital status of the asset. The gift to the marriage only occurs when the investment funds are transferred from an account in one spouse’s name into a joint account in both spouses’ names. You should retain the documentation from all investment fund transfers, even when they remain in your sole name. Failing to retain the transfer document, may also result in the loss of the protections provided to premarital assets, because you may no longer be able to prove the investment account includes premarital funds.

When separate funds are mixed with joint funds, the commingled funds are marital. If an asset is converted to a marital asset, the entire asset is subject to distribution during the divorce.

3. Document any gifts you receive

Gifts you receive from your spouse are marital assets. Gifts you receive from a third party are not marital assets, but any increase in value of the gift during the marriage is marital. If you receive a gift, make sure to retain proper documentation. If your parents gift you money each year, the checks should be made out to you individually and deposited into an account in your name only. You should try to refrain from using these gifts to pay for everyday expenses like bills.  

If the gifts you are receiving are not money, you should still retain documentation. A vehicle gifted to you, should be put in your sole name. A dog gifted to you, should be registered in your sole name. If the gift came with a letter or card, you make want to retain the letter or card for proof that it was gifted to you directly and not you and your spouse jointly.

Keep in mind that inheritances are treated similarly to gifts. If you are expecting to receive an inheritance visit a lawyer to be sure to protect that asset from equitable distribution.

4. Put it in writing.

The best way to protect assets is through a prenuptial or postnuptial agreement. If there is anything important to you, you should preserve the separate value through a written contract. The written contract can be drafted prior to and in contemplation of marriage, which is called a prenuptial agreement. The contract can also be written during the marriage, which is called a postnuptial agreement. If you are separated and considering reconciliation, it is especially important to put any agreement in a formal writing. As part of these agreements, assets that would normally be considered marital can be deemed separate property. The law allows parties to contract their marital finances freely. Be sure to contact a lawyer to draft the agreement, because marital contracts have special requirements in Pennsylvania.

In conclusion, if you want to preserve the separate value of an asset, contact a lawyer. The lawyer can assist you to make sure your separate assets are property protected from asset division through divorce.

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