The most common misconception I find in divorce clients is the idea that title to property determines ownership. Generally speaking that is true, but not necessarily during marriage and divorce. In reviewing assets in a divorce, assets are divided in three categories:
1) pre-marital assets – property owned by one of the parties prior to the marriage;
2) marital assets – things that were acquired during the marriage, usually through earnings during the marriage; and
3) gifts and inheritances – property that was gifted to one spouse during the marriage.
Typically, only marital assets are subject to division during a divorce. However, sometimes the lines can be blurred between these categories. For example, suppose a wife buys a car a year before the wedding, but has a five year loan on it. After the wedding, the payments for the loan are made from the couple’s joint checking account, which contains money earned by both parties. Is the car marital property or the wife’s separate pre-marital asset? The lines have been blurred and that determination will need to be made in order to make a distribution of marital assets.
An even more troubling situation occurs when one party receives a significant inheritance, whether in the form of money or property. If the inheritance is money, and that money is deposited in the couple’s joint banking account, then there is an argument that the money has been converted from an inheritance into a marital asset. The same can occur where a house is inherited, and the spouse is added to the deed, or the couple uses joint earnings to pay off a mortgage or make improvements to the property.
If you have property, regardless of who holds title, it is important to consult with an experienced divorce attorney to determine which property is subject to division in a divorce.