I am aware that assets acquired during a marriage are generally considered marital property. However, I believe you noted in a recent column that this also applies to a house purchased during a marriage with only one name on the deed.
If one person receives an inheritance during the marriage, purchases a home solely from these inherited assets, and puts only his or her name on the deed – assuming there is no mortgage – is the home still considered marital property?
In other words: If the inheritance is not marital property, is the home purchased with that capital also not marital property? Would the easiest way to manage this scenario be to work with attorneys on a change to the prenuptial agreement?
Thanks for any insight you can provide.
Married, but careful
“A property purchased during a marriage with one person’s name on the deed is generally considered marital property, but this will ultimately depend on the laws of your state.”
MarketWatch illustration
Dear married,
That’s a big question.
Property purchased during a marriage with one person’s name on the deed is usually – but not always – considered marital property. It will ultimately depend on the laws of your state, and whether you live in a community property or equitable distribution state.
Under community property laws, everything acquired during a marriage belongs to both parties. Fair distribution laws divide property fairly, if not equally. The accumulation of marital assets typically ends when one or both parties file for divorce.
Whether a prenuptial agreement or a modification of an existing prenuptial agreement can cause such a home purchase to become separate property will ultimately depend on the laws of your state. But the good news is that some states do allow this.
However, states typically do not allow couples to waive alimony rights or child custody decisions; these are usually decided by the court. That said, whether your spouse agrees to sign such a document is an entirely different question. If your marriage is rocky, it may be a flat no.
The Dangers of Transmutation
In general, real estate is purchased for you are married is considered separate property. But that property can be commingled—that is, converted from separate property into marital property—in a process called “transmutation” (not to be confused with transubstantiation).
Here’s an example: if you buy a house with your own money before you get married, and then use money from a joint account to pay the mortgage or use money from a joint account to make major renovations to the property, you probably mixed that well.
Even in Minnesota, an equitable distribution state, you would have to make a valid and convincing claim for that property to not be considered community or marital property. The judge in a divorce court would likely have to make the final decision.
“Generally, property purchased before your marriage is considered separate property. But that asset can be converted from marital property into separate property.”
“If the house is only in one spouse’s name, both spouses have an interest in the house and one spouse will have to buy out the other spouse’s interest,” according to Williams Divorce & Family Law, a firm based in Woodbury. , Minn.
If you buy a house with separate assets during your marriage, be careful. “It may even be the case that the titled spouse assumes the interest of the other non-titled spouse, in which case the title must be placed in the name of the non-titled spouse after the divorce process is completed.”
Even more bad news, according to the law firm: “This principle also applies to debts. If one spouse renounces the mortgage because he or she has credit problems, this does not absolve that spouse from joint responsibility for repaying the mortgage debt.”
The increase in value of a property
The same goes for Texas, which, unlike Minnesota, is a community state. “Texas considers the property and income of both spouses acquired during the marriage to be community property,” according to the Larson Law Office in Houston.
“It doesn’t matter who paid for the property or whose name is on the title or deed, as long as you acquired the property during your marriage and it was not a gift, inheritance or certain types of personal injury settlements,” the company said . adds. The same goes for debt, with a few exceptions.
Finally, in some states, including New York, an appreciation in the value of separate property may be deemed marital or community property by a judge during a divorce if the spouse whose name is not on the title can prove that the appreciation was partially due. to their efforts.
It’s understandable that some couples want their own financial independence even when they’re married, and knowing they have a separate property can certainly give them peace of mind. But if you are planning to divorce, it may be wiser to wait before making this purchase.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Tweet.
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