Should Weddings Come with a Warning Label? – Part V – Beware: It’s so easy to convert separate property into marital property you may have already done it!

propertyIn my last post I continued to lament that many people faced with a divorce would have benefitted from a bit of education on divorce laws before they got married.  In this post I continue down the aisle….  more things people should know before they utter “I thee wed.”

So you think you understand the difference between marital and separate property in New York?  You understand that if you get divorced you get to keep your separate property and a court will first determine what each of your separate property is and will divide only the marital property.  You understand that absent a prenuptial agreement, in New York, the courts assume that all property acquired during a marriage is marital.  But you also understand that separate property includes, all property owned at the time of the marriage, gifts from anyone other than your spouse to you alone (before or during the marriage), inheritances, and proceeds from personal injury actions for pain and suffering.  So as you start walking down that aisle, you at least think that even if you divorce down the road, what you have today, will remain your separate property no matter what… right?

Hold the phone… back up a second.  You need to be aware of some more “divorce stuff”…

A leopard may never change its spots, but it isn’t that difficult to change separate property into marital property, and it’s even easy to do by accident.

So let’s say that when you get married you wake up one morning and decide that you should open a joint bank account.  Hey, you’re married right?  It’s a spiritual and economic partnership right?  So you wander down to the bank and you both sign signature cards and open the account.  The bank officer asks you what you’d like to put into the account and you figure heck, let’s both put in $5,000 from our “own” separate property accounts which we had when we got married.  Congratulations!  You just converted $5,000 in separate property into marital property.  Did the bank officer tell you this?  Did a warning light flash or an alarm bell right?  Of course not.Who’s thinking about divorce at this point, you just got married?  But just the same, the courts will assume that since you co-mingled your separate property funds by depositing them into a joint account, you intended to convert your separate property into marital property.

Another example.Your Uncle Abe dies and leaves you a lovely inheritance of $50,000.  That’s separate property right?  Absolutely…but when you get the check without thinking, you deposit into the joint account.  Congratulations!  You just converted your inheritance into marital property.

Last example.When you get married your spouse moves into your house which you own in your own name.  A few years go by.  You decide you want to remodel the kitchen and you’re going to refinance your mortgage to raise the funds to do it.  You and your spouse apply for the mortgage and the bank says that it noticed that your spouse wasn’t one of the owners on the title to the house.  Your spouse says he/she isn’t comfortable signing to be responsible on a new mortgage when he/she has no interest in the house, so you agree to put your spouse on the deed as an owner.  Guess what?  Congratulations… your house, which was always your separate property, was just converted (the legal term is “transmuted”) into marital property and if you are ever divorced in the future, the house will have to be divided between the two of you.

What’s the takeaway here?  Be careful.  Know what you are doing when you are making big purchases with your spouse, especially if you are using what you think is your separate property.  If you aren’t sure, ask an attorney who will know.  You don’t want an unpleasant surprise down the road do you?

Hey… all the best for a great Thanksgiving!

Next – Part VI