Keeping Assets Separate In Case of Divorce
Amidst the excitement of getting married, you may not want to think about the possibility of divorce. However, taking steps for financial self-protection in case of divorce is really no different from any other safety precaution.
Couples who are not yet married can specify in a prenuptial agreement what property and debts they want to keep separate in the event of a divorce. Before the wedding, you might want to consider getting appraisals for assets, such as businesses, that can be difficult to valuate. If you are already married, you could create a post-nuptial agreement that serves much the same purpose as a prenup.
You may also want to consider opening individual accounts even if you generally use a joint account. Any property you want to keep separate can be maintained from this individual account. Mingling an inheritance or other individual property with marital finances can result in that property being considered marital, or community, property. If one person has inherited a house, shared funds should not be used for its upkeep, renovation or other expenses unless the person wants it to be considered community property. You should keep records of all accounts, and of any wills and trusts, related to inheritances.
In a high-asset divorce, the process of property division can be particularly complicated. Since California is a community property state, all assets that the couple acquires after the marriage are considered marital property unless there is an agreement in place that states otherwise. This may also apply to the appreciation value of assets a person brought into the marriage. If the income of one spouse was significantly higher than the other, that person might be required to pay spousal support to the other. Even if that person earned most or all of the income in the marriage, the other spouse may be entitled to an equal share.
If you are planning to be married, or are currently married and brought individual property into the marriage, it may be worth consulting with an attorney to discuss how best to protect your finances in the future.