How to Maintain Your Possession on Inheritance in a Divorce
Newly married couples believe in the idea that everything is to be shared between the two equally; and it intensifies the newly found happiness by many folds.
However, when a marriage ends in divorce, all of a sudden, the perspective changes overnight. As a divorce takes place, it becomes almost impossible to retain gifts, property, or investment money; even though it was not in the first place decided to be shared.
Divorce law varies depending on the state you live in; and so do the distribution of property or money. Some states, also known as kitchen-sink states, like Connecticut, Michigan, Vermont, and Massachusetts do not dictate any distinguishing line between marital and separate property.
When it comes to inheritance, there are a few measures that you may take to turn the outcome, more or less, in your favor, irrespective of the state divorce law. Here are a few strategies that you should consider seriously:
Set a Prenup
Although it doesn’t secure it fully for you, postnuptial or prenuptial agreements can work as a protection when it comes to property, investment money, art collection, or business.
Save Documentation
You should carefully preserve any paperwork showing inheritance intended for one partner only. For example, in the state of Minnesota you will be able to establish claim over a gift received during or before the marriage. But to do so, you must have had relevant documentation as a proof.
A copy of gift-tax return could come handy in such a case. The paper will also clarify who was the original beneficiary. In other cases, the donor can verify to whom the gift was intended to, solely.
Maintain Separate Accounts
As a couple you should not merge your investment money or other financial assets in an account that exclusively belongs to your spouse. The best practice is using separate bank accounts to avoid unnecessary difficulties.
If someone fails to show their share of contribution in an account owned by the spouse, the money will be split in half between the divorced couple.
Use a Trust
Veteran economist Russell Redenbaugh suggests: a trust should be used when you intend to give a home to your child. Certain provisions in a trust will ensure that your child doesn’t end up losing the home to his or her partner in case of a divorce.
While the process is costlier than gifting simply cash, it would contribute to a foolproof plan and secure your child’s future.
Maintain Titles under One Identity
If your marriage lacks a prenuptial agreement, you should not include your spouse’s name to the deed. It will preserve your sovereignty over any separately owned property.
The same practice should be followed if one of the spouses receives financial payment to buy an investment property. In a few states, if the finance is used to buy a house inhabited by both spouses, in the case of a divorce it is likely to become a marital property, and can be subject to equitable financial settlements.
So, adding your spouse’s name to the deed will only jeopardize your claim on the whole house. Mortgage and renovation refinancing should also be handled tactfully to avoid ending up without the total ownership of any physical or financial property.