“What’s mine is . . . yours?”
Welcome back to the long-awaited second part of my series on demystifying myths about asset division in divorce. I started this incredible year by addressing the most common of misconceptions about the divorce process – the impact of an extramarital affair in asset division. Since then, the world has seemingly turned upside-down. So for those of you yearning for simpler times, go back and check out the first part of this series before diving into Part 2.
In this second part of the series, we consider another of the common misconceptions about dividing assets in the divorce process, what happens to “personal” assets? By “personal” assets, I am generally referring to those premarital assets (including real estate) titled in one spouse’s name, inherited assets received by one spouse prior to or during the marriage, personal business interests, and those investment and retirement accounts that you worked so hard to grow over time. Basically, anything you would think of as “mine” instead of “ours.” As you can imagine, the divorce process heightens this sense of personal ownership of these assets, which makes what I am about to say next all the more painful to hear – absent some limited circumstances (i.e. a valid prenuptial/postnuptial agreement; keeping the asset entirely segregated from the rest of the marital estate; etc.) these personal assets can and will likely be considered part of the marital estate, subject to equitable (repeat after me: “not necessarily equal”) division in the divorce process.
I know what you are thinking: “So the house I’ve owned in my sole name before I even met my spouse will be a marital asset, and my soon-to-be-ex will get a piece of it?” In short, likely “yes and yes.” Massachusetts is a state that very broadly defines what types of assets constitute a “marital asset,” and the general rule of thumb is that if it is owned by either party at the time the divorce process begins, it will be considered a marital asset subject to equitable division in the divorce process unless somehow proven otherwise. This means that the equity in the house that has been solely titled in only one party’s name prior to and throughout the marriage, may ultimately be divided equally, perhaps even resulting in the transfer of title to the property to the other spouse as part of the final division of assets.
As with most aspects of the divorce process, there is a lot of nuance in how these “personal” assets are handled and what the ultimate division of these types of assets will be. Depending on the circumstances of the marriage, particularly the length of the marriage, the acquisition and preservation of the particular asset, there can be effective arguments to minimize what the other spouse may receive from these “personal” assets in a divorce. The asset may still be considered a marital asset, subject to equitable division, but only a small portion of the asset is ultimately allocated to the other spouse as part of the final division of assets.
The best way to try and keep these “personal” assets to yourself during the divorce process is by having a valid prenuptial (or postnuptial) agreement. A prenuptial agreement is a contract entered into by the future spouses prior to the marriage, while a postnuptial agreement is a contract entered into by the spouses during the marriage. Both of these contracts often address the division of marital assets, among other financial considerations, in the event of a divorce. For many reasons, the postnuptial agreements are more strictly scrutinized at the time of divorce, and, accordingly, are also far less common than prenuptial agreements. Nevertheless, if these contracts meet certain requirements at the time of their execution and at the time of divorce, they will be held to be valid and enforceable and those “personal” assets, often defined as “separate property” in these contracts, can remain separate as part of the divorce process.
Therefore, if you anticipate that your tolerance for sharing your “personal” assets with your spouse at the time of the divorce will be roughly the same as my toddler’s current unwillingness to share his toys with others, then you should probably reach out to a family law attorney about your options to keep what is “yours” very truly yours.