The Do’s and Don’ts of Managing Marital Property

Managing marital property can easily become one of the most complex pieces of a divorce settlement.  This is true even with only moderate assets.

For some couples, dividing marital property during a divorce is simplified due to a prenuptial agreement or state law.

For others going through a divorce, division of property is a difficult part of the process due to the amount or types of assets (e.g., equity in a marital home, time share property, retirement asset(s), investment accounts, and accumulated debts).  The division of property is also often made more more difficult because of the  desires of each party or because there no “clear” or unambiguous state laws or prenuptial agreement.  Georgia is an “equitable division” state; this means that the Court has absolute discretion to divide marital property in a fair way after hearing evidence—please understand that such a division does not always mean “equal.”

By determining what is and isn’t marital property before moving into divorce proceedings, you can minimize your assets’ risk and maximize the chances of any potential settlement.

The first step in determining the best way to manage and protect your marital property and assets, is to define what “is” and what “isn’t” considered marital property, then cover specific recommendations to maximize any settlement to your benefit.


What is Considered Marital Property?

Marital property is considered anything that is acquired or shared during a marriage. This includes both financial assets like bank accounts and stocks, as well as non-monetary assets like homes, cars, and art; it also included debts accumulated during the marriage.

During a divorce, everything that is acquired or shared during the marriage, is considered marital property. Some states have community property laws, which requires an equal, 50-50, split of everything.  The best example of a community property state is California.

Most states, though, including Georgia, use an equitable division of property, which requires that assets are managed based on the specific facts of the case, the needs and assets of each party, and, oftentimes, the conduct of one spouse. In most states, a prenuptial agreement will expedite and aide a Court in determining the division of property.  However, even a prenuptial agreement is rebuttable and can be overturned if not done properly or appropriately.  While a prenuptial agreement does not supersede state laws, it does serve as a rule or guide for the parties and Court in dividing property on a final basis.

If a prenuptial agreement is not honored by a court, or considered invalid, and an agreement can not be reached out of court, then the court will determine the division of assets. In that case, it is important to prioritize facts related to the property to be divided and present a cogent argument to the court as to “why” the court should accept your argument and divide the property the way you want it to.  This is particularly true if your assets have been comingled. That is, when non-marital and marital property have been mixed, making non-marital property lose its character as “non-marital.”

These do’s and don’ts of managing marital property can help you determine the best way to manage your assets before, during and after beginning the settlement and divorce process.


The Do’s of Managing Marital Property

DO consider using a prenuptial agreement.

Prenuptial agreements cover what will happen to property in the event of divorce or death. This clarifies what will not be considered marital property to protect existing assets. Many believe that prenuptial agreements are only for those with significant assets to protect, but most couples would benefit from working with a lawyer to draw up an agreement that both parties agree upon before anything happens.

DO maintain records to establish ownership.

These records establish the property you brought into the marriage, and act as proof in the event of a divorce. This can also include gifts or inheritance you receive while married. It also may include things like deeds, titles, receipts, and other proof of ownership. The more thorough the records, the more likely you will be to maintain ownership in the event of a divorce. 

DO keep assets separate if you’re concerned about keeping them in the event of a divorce.

Commingling property makes it difficult (if not impossible) to distinguish separate assets. If you’re concerned about specific assets like a retirement, equity in a house, or property, then keep the asset completely apart from “joint” or “marital” property.

Keep in mind that if you use some of that asset to buy something for the family, or if you put it in a “joint” account and purchase items during the marriage, that asset is now commingled and has lost its’ character as non-marital property.  It will be subject to Georgia laws on equitable division.

DO prepare well before signing the prenuptial or settlement agreement.

One way to identify and prepare for non-marital and marital assets to be maintained or divided is to set up these accounts properly before signing a prenuptial agreement or settlement agreement. A prenuptial or postnuptial agreement may help because you and your spouse are in very likely in agreement on how to divide your property in the case of divorce or death.  However, once a divorce is filed, you won’t be able to move assets as freely without consequence.

DO know that an asset’s increased value can be considered marital property.

Even if an asset was owned by one party before the marriage, any increases in value can be considered part of marital property if that asset has been comingled. This is primarily determined by whether the asset is active or passive. Active appreciation refers to anything that has grown through effort, like managing investments or renovating a property.  Passive appreciation refers to anything that happened as a result of simple economic or market forces, like interest on your money or appreciation of you property.

While there is not much you can do about changing these active assets, it’s important to be prepared in handling any division of them in the event of a divorce.

DO keep personal injury case proceeds separate.

If you want to protect proceeds from a personal injury case to maintain its non-marital status, then then the settlement should be primarily a result of your “pain and suffering” and not simply a result of your lost wages or medical expenses. It’s important to note that any settlement that is for expenses or that reimburse you for lost income or your spouse’s loss of companionship. Because income is considered joint property, anything replacing income will be considered a shared asset.


The Don’ts of Managing Marital Property

DON’T pay off marital debt with non-marital funds.

If non-marital funds are used to pay off a marital debt, the assets could then be considered marital and would be subject to equitable division or a prenuptial agreement. Instead, use shared assets like income to pay off debts that were incurred during your marriage to keep non-marital funds separate. 

DON’T use non-marital property to buy shared property.

Commingling non-marital and marital property will effectively transition the character of all assets from non-marital into marital property. This means that you should only use non-marital property to purchase additional assets if you will be the sole owner. A car that is bought with your non-marital property and titled in the name of you and your spouse would be considered marital property. (This could also lead to your non-marital assets being claimed as marital.) 

DON’T deposit income into non-marital accounts.

Because any income made while married is typically considered marital property, it will need to be kept separate from non-marital property. This can still be in a separate account under just your name, but it shouldn’t be deposited into an acocunt with pre-existing non-marital assets.

DON’T use non-marital assets to open a joint bank account.

Even if you plan to maintain records on what funds belong to you and your spouse, it’s important to keep separate accounts if you want the funds for non-marital property. If necessary, use income or other pre-determined “joint” financial assets to open joint accounts.

DON’T assume premarital property will stay non-marital.

Any property, like a home, boat, or rental property owned before marriage is never completely safe from partially becoming marital property. This is particularly true if you and your spouse have invested into it to maintain the property or contributed substantially to the property’s improvement. If this value increase of the property is deemed marital, your spouse is likely be entitled to a portion of the increase in value of the property.

Managing marital property is an important piece of entering into the divorce settlement process. Because Georgia uses an equitable division of assets analyesis in divorce cases, determining what is and isn’t marital property is one of the most important steps you can take to protect your property. Use these do’s and dont’s as a guide, and always consult with a lawyer regarding your unique case specifics.

Your Marietta Based Divorce Attorney

If you’re considering a divorce and are looking for expert, compassionate guidance on managing assets, we would like to help.

You can reach us 24/7 to schedule your no cost divorce consultation by calling (678) 738-0056.