Many individuals wonder whether it matters how property is titled in a divorce. In other words, some theorize that if an asset is in their individual name, it might mean that they will receive this asset in a divorce.
It could be a variety of property or assets. Some might try to title a bank account in their own name. Others might purchase a vehicle and put it in their own name. In other cases, an individual might set up an investment account that only has their name on it, but not their spouse. The possibilities can be infinite.
When a divorce takes place, many think the asset will be given to them by the court because it is not jointly titled with their spouse. A common question for many is whether this is accurate or not.
Titling of Property Not That Important
The reality is that how property is titled in a divorce is normally not that important. Instead, in states where equitable jurisdiction is controlling, courts look to when the property or asset was acquired. If the property is acquired during the marriage, it is normally labeled marital property. However, if the property was acquired before marriage, it is presumed to be separate property.
Courts then have to divide marital property in a just matter when considering all the factors. The factors can vary by state, but they can include different criteria. This includes contribution of each party, the length of the marriage, the education and work history of the parties, the conduct of the parties in some states, and a litany of other factors.
In terms of the titling of the assets, it is truly not that important. If the asset is in one spouse’s name, it does not matter if the asset was acquired during the marriage. A party cannot purchase property or buy an asset with marital funds and assume that the asset will be allocated to them in a divorce.
Other Options for Individuals
A prenuptial agreement is something to consider for those who have substantial property or assets prior to marriage. To ensure they receive it in the divorce, they must agree to it beforehand. Through a prenuptial agreement, the parties can agree to have property or assets set aside to them in the future.
It is vital to draft the prenuptial agreement appropriately and that both parties have independent counsel. Other important criteria are that there needs to be full and fair disclosure and that there be no duress or undue influence.
Even after the marriage, parties could enter into a postnuptial agreement to denote who would get what property or assets in the case of divorce. That said, parties sometimes have little incentive to do this after the marriage.
Inheritance or Gifts A Potential Exception
One potential exception is where a party receives inheritance or gifts during the marriage. Inheritance or gifts are generally viewed as separate property in a divorce.
Thus, if parties place inheritance or gifts in a separate account away from other marital property or debt, doing so makes sense. Otherwise, there can be a risk that the separate property is commingled with other marital funds or property. When this happens, it can convert separate property into marital property.
For this reason, parties who receive inheritance or gifts should speak to an attorney if they want to ensure that it remains their separate property. It often makes sense before they receive the inheritance or gift to ensure it is handled appropriately. A separate account in this instance may make sense for liquid assets.