Commingling Assets – Yes or No?
We know we say this a lot but it does bear repeating. Nobody gets married with an eye on a future divorce. However, divorce can and does happen. Google the statistics – they are everywhere. It happens to a lot of couples and it could happen to anyone. This is why we plan for the worst and hope for the best. It’s the reason we have car and health insurance. You do not expect to be hit by a drunk driver and need your car repaired and treatment for a broken arm, but your insurance makes that financial hit a lot easier to deal with.
Our Franklin family law attorneys look at prenuptial agreements as a sort of insurance for your marriage. Divorce probably is not going to happen to you – but if it does, you and your spouse will be ready to deal with it in a mature and less adversarial manner. We mention this because a recent advice column in MarketWatch demonstrated a real-life example of why you should protect your assets when you get married, as you just never know how your marriage may unfold.
“Wondering in California” writes to MarketWatch’s Quentin Fottrell:
I bought my home in California for $520,000 in 2017. It’s now worth $980,000. In 2019, I met my now-wife who moved in at the beginning of 2020. We married six months later in July 2020. Things were going great and we decided to have one bank account. I also added my wife to my home on the deed as 50/50 in January 2021.
Then, “Wondering” says after all of this, the relationship took a drastic turn for the worse and now they want to divorce their wife. Their question to Fottrell: “Is my wife entitled to half of my home given that she is on the deed and not the loan? Keep in mind she was only added to the deed in 2021. Or is she only entitled to the equity from the time her name was added to the deed?”
Fottrell was not happy with the advice he had to dispense:
This is one of those letters where I wish you had written before you put your wife’s name on the deed of your house, and before you had commingled your bank accounts. For everyone else, it serves as a cautionary tale. Your wife is entitled to half of your home and half of your commingled funds, in the event that you divorce.
This is true. As you can tell from the name, “Wondering” is from California, which is a community property state, and that is how the law works. In their letter, “Wondering” also mentioned a huge disparity in the couple’s incomes, with the wife making less. With that shared bank account, however, the wife will be entitled to half of those funds, whether she earned that money or not, thanks to community property laws and commingling of funds.
Should my spouse and I commingle funds?
Unlike California, Tennessee is an equitable distribution state when it comes to property division. What this means is that divorcing couples split assets in an equitable, not 50/50, manner. Only shared (marital) property is up for division. This is where the issue of commingled assets and funds come in.
The Legal Information Institute explains commingling as:
Certain assets acquired during a marriage as being jointly owned by both spouses. If a spouse mixes their separate property with marital property, such as in a joint bank account, and there is later a divorce, then the spouse risks forfeiting some of the separate property when the marital property is divided.
When you get married, it is tempting and convenient to keep your money in a joint account. However, it is important to really think about this. Even the assets you believe are yours and yours alone can easily become marital assets if they become commingled.
Here’s an example of this. If your close relative passes away and leaves you an inheritance, and you deposit those funds into your own personal account, those funds are considered separate property. However, if you use those funds to improve the marital home or deposit that money into a joint account with your spouse, you have commingled funds – and that inheritance is now shared property.
Our family law attorneys always recommend considering a prenuptial agreement if you are getting married. “Wondering in California” will be wondering what happened to their money for a very long time. We can help make sure something like this will not happen to you and your spouse. The longest marriages start out on a strong foundation, built with the honesty and transparency a prenuptial agreement can provide.
Fottrell’s final advice is wise:
It’s a tough break — and a lesson to people everywhere to be careful about protecting their assets, especially with someone who they may have married in haste. Romance and emotions aside, six months or even a year is typically not long enough to get to know someone. People may behave in accordance with their wants and needs. You have learned that, and it could be a costly lesson.
We do hope Wondering was able to patch up their marriage and move forward.
In the meantime, if you need assistance with any family law matter, we can help – including divorce, child custody, alimony, child support, and more.
At the Law Offices of Adrian H. Altshuler & Associates, we are here to help. To schedule a consultation, call us or fill out our contact form today. We serve clients throughout Franklin, Columbia, and Brentwood.