Having family wealth is a blessing, but it comes with tremendous responsibility. You want to safeguard your assets to ensure your financial future and preserve wealth for future generations. Choosing the right wealth management strategy depends on several factors, including the size of your estate, the age and maturity of your potential heirs, your marital status, and the nature of the assets.
Divorce is a significant challenge people face when trying to preserve family wealth. You may be worried that you will lose part of your inheritance in a divorce or wonder whether you are entitled to any of your spouse’s inheritance if you divorce. Inheritances and other gifts are supposed to be separate property, meaning they are not divisible in a divorce. However, people frequently commingle their assets, making it difficult to differentiate between separate property and marital assets without assistance from an experienced high-asset divorce attorney. A Hackensack divorce and inheritance lawyer can help you protect your financial future.
Separate property refers to assets and liabilities a spouse has before marriage, as well as assets received through a device or gift during the marriage. Marital property includes all assets and debts acquired by the couple during the marriage, regardless of who acquired them.
The default rule is that inheritance and other financial gifts are not marital property and are not subject to equitable distribution in a divorce. Suppose a couple has kept their assets separate and not commingled them. In that case, it is easy to trace assets from an inheritance and not distribute them to the other spouse. A family lawyer in Hackensack can collect evidence to show money came from an inheritance during the divorce process.
These general rules are guidelines that may not reflect reality. Many married couples combine their assets, making it challenging to differentiate marital property and separate property. People do three main things that change the nature of their property: commingling funds, adding spouses to titles, and increasing the value of property.
The most common issue is commingling of funds. A spouse might put their separate property into a joint bank account, which is commingling funds. Removing joint funds and placing them in a separate account is another way to commingle funds. To keep property separate, spouses must avoid commingling it with marital property.
Putting a spouse’s name on the title also changes the nature of the property. When someone inherits something with a title or other formal ownership record, like a deed, they should title the property in only their name if they want to keep it separate. If someone adds their spouse’s name to a title or a deed, the property becomes marital property. Essentially, the person gifts their separate property to the marital estate.
Sometimes, the change in the nature of the property is not related to how people classify it. For example, when one spouse contributes to the value of property without taking title to it, the nature of the property can change. The most common example is if one partner inherits real property (a home) and the other partner contributes labor or money to improve it. A change could also happen with other types of property, such as an antique home a couple restores together. While the antique home may remain separate property, the improvements would be marital property.
In theory, the best way to keep property separate is not to share it, but the reality can be complicated. A Hackensack family attorney who handles divorces and inheritances can provide strategies to help couples keep their property separate.
Proving that separate property is separate is one of the biggest challenges people can face during a high-asset divorce. To prove property is separate, you must be able to trace the source of the property and prove it is solely yours.
No matter your particular circumstances, a Hackensack divorce and inheritance lawyer can help you protect what’s yours if you’re facing divorce. To learn more, schedule a consultation with an attorney from O’Cathain Law Group Family Law Department and Move Forward confidently with your inheritance plans.