Love, Loss, and Legacy: Protecting Your Assets and Inheritance During Divorce

Divorce is not only emotionally challenging but can also involve complex financial considerations, particularly when it comes to dividing assets. For many individuals, protecting personal assets and inherited wealth is a top concern during divorce proceedings. While assets acquired during the marriage are generally considered marital property and subject to division, assets you brought into the marriage or inheritances you received may not always be treated the same way. Understanding how to protect your financial legacy—whether it’s an inheritance or valuable personal assets—during a divorce is crucial to securing your future.

Understanding Marital vs. Separate Property

Marital Property

Marital property refers to assets that are acquired by either spouse during the course of the marriage. In most cases, marital property is considered joint property, meaning it is subject to division in a divorce. This division aims to distribute assets in a fair and equitable manner, though "equitable" does not always mean an even split.

• Examples of Marital Property:
  • Shared bank accounts and joint savings.
  • A family home purchased after the marriage.
  • Investments, retirement accounts, or pensions earned during the marriage.
  • Any income earned by either spouse while married.

Separate Property

Separate property, on the other hand, includes assets that belong solely to one spouse and are not subject to division in a divorce. These assets are generally acquired before the marriage or through individual inheritance or gifts during the marriage, provided they are kept separate.

• What Qualifies as Separate Property:
  • Assets owned by one spouse prior to the marriage.
  • Inheritances received by one spouse during the marriage, as long as they are kept separate.
  • Gifts given explicitly to one spouse (not to the couple) during the marriage.
• Why It’s Important to Keep Property Separate: For separate property to remain protected, it must be kept distinct from marital assets. This means avoiding the mixing, or "commingling," of separate and marital property. For example, depositing an inheritance into a joint account or using inheritance funds to pay for a shared home could blur the line between separate and marital property, making it subject to division.

Commingling Assets

Commingling occurs when separate property is mixed with marital property, making it difficult to distinguish what belongs solely to one spouse. This can happen in many ways, such as using inheritance funds to make joint purchases or combining individual savings with shared accounts. When this occurs, courts may treat the entire asset as marital property, subjecting it to division in the divorce.

• How Commingling Complicates Asset Division: For example, if you receive an inheritance and use part of that money to renovate a home that you share with your spouse, the inheritance may no longer be considered separate property. Instead, it becomes part of the shared asset (the home), which will be divided during the divorce. Without clear records or proof of ownership, it can be difficult to protect these assets as separate property.
• Steps to Prevent Commingling:
  • Maintain Separate Accounts: Keep any inheritance or personal assets in accounts that are not shared with your spouse.
  • Avoid Using Separate Property for Joint Purchases: If you want to protect your assets, avoid using inheritance or separate funds to pay for marital expenses or purchases.
  • Keep Clear Documentation: Maintain detailed records of when and how you acquired separate assets, as well as how they have been used. This can help prove that these assets should remain separate during the divorce process.

Protecting Your Inheritance During Divorce

Inheritance Rights in Divorce

In general, inheritances are considered separate property and, therefore, not subject to division in a divorce. However, the way inheritances are handled during the marriage can impact whether they remain separate or are considered marital property. If an inheritance is kept separate and not commingled with marital assets, it can typically remain protected.

• How Inheritances Are Treated in Divorce: If you receive an inheritance and keep it in a separate account, away from marital funds, it is likely to remain your personal property during divorce proceedings. However, if inheritance funds are mixed with marital property, such as being used to buy a family home or placed into a joint account, it could be considered marital property and subject to division.

Strategies for Safeguarding Your Inheritance

There are several strategies that can help you protect your inheritance and ensure it remains separate property in the event of a divorce. These strategies should be implemented early and followed consistently to avoid complications later.

• Prenuptial or Postnuptial Agreements: One of the most effective ways to protect your inheritance is through a prenuptial or postnuptial agreement. These legal agreements can clearly outline which assets, including future inheritances, will remain separate property in the event of a divorce. Prenuptial agreements are signed before marriage, while postnuptial agreements are created during the marriage. Both are valuable tools for securing your financial legacy and preventing disputes over inheritance.
• Maintaining Separate Accounts: To prevent your inheritance from being considered marital property, it’s important to keep inherited assets in individual accounts. Do not deposit inheritance money into joint accounts or use it for shared expenses, as this could lead to commingling of funds. Keeping your inheritance separate ensures that it remains easily identifiable as your own personal property during divorce proceedings.
• Clear Documentation: Thorough documentation is essential when it comes to safeguarding an inheritance. Maintain detailed records of when you received the inheritance, how much it was worth, and where the funds or assets have been held since. Additionally, if you use any part of your inheritance for personal investments or purchases, keep records of these transactions to prove that the funds were kept separate from marital property. This documentation can be invaluable in protecting your inheritance during a divorce settlement.

Legal Steps to Take During the Divorce Process

When going through a divorce, working with an experienced family law attorney is essential to ensuring that your inheritance is correctly classified and protected. Your attorney can help you identify which assets are legally considered separate property and guide you through the process of safeguarding them during the settlement.

• Working with a Family Law Attorney: A knowledgeable family law attorney can assist you in determining which assets are at risk and how to prove that certain assets, like your inheritance, are separate property. They will help you present the necessary documentation and evidence to the court, ensuring that your inheritance is protected.
• Steps to Ensure Your Inheritance Remains Separate: During divorce proceedings, it’s important to be proactive about identifying your inheritance and making sure it is treated as separate property. Your attorney will work with you to ensure that your inheritance is excluded from the marital estate. This may involve presenting financial records, legal agreements (such as a prenuptial agreement), or other documentation that proves your inheritance was kept separate.

Protecting Other Valuable Assets

Business Interests and Investments

For business owners or those with significant investments, protecting these assets from division during a divorce is a top priority. Since businesses can represent a substantial portion of a person’s financial wealth, it is important to ensure that they are shielded from division as much as possible.

• Protecting a Business During Divorce: If you own a business, particularly one that was started before the marriage, you may be able to argue that it should be considered separate property. However, if the business grew significantly during the marriage, or if marital funds were invested in it, the increase in value may be considered marital property.
• Strategies for Protecting Business Assets:
  • Shareholder Agreements: For those who co-own a business, having a shareholder agreement in place can protect the business from division during divorce. This agreement can outline what happens to ownership shares in the event of a divorce, ensuring that the business remains intact.
  • Trusts: Placing business assets into a trust can be another effective way to shield them from division in a divorce. Trusts are a legal mechanism that can separate ownership from control, potentially protecting the business from being considered marital property.

Real Estate and Property Holdings

Real estate can be one of the most valuable assets involved in a divorce, and whether a property is considered marital or separate property depends on several factors. Understanding how real estate is classified and what strategies can be used to protect it is essential for negotiating a fair outcome.

• Classification of Real Estate:
  • Property Owned Before the Marriage: Real estate owned prior to the marriage is generally considered separate property. However, if marital funds were used to improve or pay down a mortgage on the property, the increased value or equity in the home may be subject to division.
  • Property Purchased During the Marriage: Homes and real estate acquired during the marriage are typically considered marital property, even if only one spouse’s name is on the title. This means they are subject to division in a divorce settlement.
• Tips for Negotiating the Division of Real Estate:
  • Appraisal and Buyouts: If you wish to keep a property, consider having it appraised and offering a buyout to your spouse. This allows you to retain ownership without having to sell the property and split the proceeds.
  • Keep Detailed Financial Records: If you want to argue that certain real estate should be classified as separate property, keep records of the property’s ownership, purchase history, and any contributions made using non-marital funds.

Retirement Accounts and Financial Assets

Retirement accounts, pensions, and other financial investments are often subject to division during divorce. Since these accounts represent future financial security, it’s crucial to take steps to protect them.

• Division of Retirement Accounts: Retirement accounts are generally considered marital property if contributions were made during the marriage. This applies to pensions, 401(k) plans, and IRAs. Even if the account is in only one spouse’s name, the other spouse may still be entitled to a portion of the funds.
• Strategies for Protecting Retirement Assets:
  • Qualified Domestic Relations Orders (QDROs): A QDRO is a court order that allows for the division of retirement plan assets without incurring early withdrawal penalties. This order specifies how retirement assets will be split and ensures that both spouses receive their agreed-upon share.
  • Negotiating for Other Assets: In some cases, one spouse may agree to give up their claim to a portion of retirement assets in exchange for other assets, such as a larger share of the marital home or liquid investments. This can help protect retirement accounts from division.

Protect Your Financial Legacy: Contact Hartin Family Law Today

Divorce can put your valuable assets and inheritance at risk, but with the right legal support, you can protect your financial future. At Hartin Family Law, we provide personalized legal advice to help you navigate asset protection, business interests, and inheritance issues during divorce proceedings.

Don’t leave your financial legacy to chance. Contact Hartin Family Law at (516) 666-0539 or visit us online at HartinFamilyLaw.com. Let us help you protect your assets and ensure a secure future for you and your family.

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