Minnesota residents who have substantial assets may want to be prepared before tying the knot. There is often some confusion about what constitutes marital property. Many may believe that financial accounts opened before marriage are still considered separate property in the event of a divorce. Unfortunately, this is not always the case and the result could be a costly split if there is no prenuptial agreement in place. But why?
It's easy to understand that assets acquired during a marriage are considered marital property and subject to division in a divorce. So shouldn't assets acquired before a marriage be considered separate property? In some cases, yes. Some examples are inheritances, compensation from lawsuits, gifts and other items acquired before marriage. But an issue occurs when these assets are commingled into a joint account or used for marital purposes, such as home improvements or vacations.
When a person opens an account before marriage and continues to maintain that account during the marriage, it is assumed that the person is using joint assets to fund that account. That's why detailed recordkeeping is crucial. Better yet, draft a prenuptial agreement. This allows the property to stay separate.
Those who own a business may need to take additional steps. Besides a prenup, there are other legal agreements that can be used to limit how much share of a company that a spouse can receive in a divorce.
It's better to be safe than sorry. It's not wise to assume that all property will remain separate once the couple says "I do." Those who enter a marriage with significant assets should consider a prenup to protect assets.
Source: Forbes, "Getting Married? Got Assets? Read This First," Orrit Hershkovitz, Jan. 30, 2015