Mixing Marital Money

One of the most common questions I receive from my younger clients is how to keep their money separate once they’re married. It turns out the answer is: It depends.

The rules differ slightly from Connecticut to New York, but the concept of?commingling?is used in both states. Commingling means what it sounds like; the mingling of funds — it could refer to mixing separate property with community property, or the mingling of the two spouses’ money (it’s a generic term).

When marital money and separate property commingle, things can become complicated if there is ever a divorce. The act of commingling often renders an entire asset into marital property. For example, if Spouse A buys a house with their own money — but uses money earned during the marriage to maintain it — that house becomes joint property regardless of how little commingling was done by spouse A.

Businesses are different in the way that they are distributed — an expert has to come in to value the company, and then it is distributed to the divorcing parties. The non-owner spouse generally does not get an equal share of the business, instead receiving between a five and 30 percent share.

Prenuptial and postnuptial agreements can be used to take more control over the commingling of assets. Things like stipulating that a house will remain the property of one spouse, regardless of commingling, are common provisions in agreements like these. Incidentally, getting a prenup or a postnup is also a great time to take stock of your stocks and everything else since you’ll have your books out anyway.

It is still possible to prevent an asset from being considered commingled, but the burden of proof is on the person who wants it to be separate property. Proof will be needed, so, as usual, having good books and records will save you time and money.

To learn how JHA can help you prove certain transactions took place,?contact us.