Category Archives: Divorce Attorney

Eric and Ariel reached the terrible choice to divorce after 19 years of marriage. Ariel’s profession of collecting and selling various collectibles began before their marriage. However, now that she is getting a divorce, she is concerned about the future of her business. Will it be divided between her and Eric, or does she retain sole ownership as she owned it before to their marriage? Well, it depends.

A business will be evaluated as an asset in the case of a divorce. Whether it will be shared depends, among other things, on state rules, whether the business is considered marital property, and whether a prenuptial agreement is in existence. Learn more about divorce and company ownership by reading on.

Define Conjugal Property

The key determinant of whether an enterprise is subject to property division is whether it is classified as marital or separate property. The term “marital property” refers to the joint property of a married couple, which is more complicated than it may appear.

First, state rules influence the definition of marital property, which is typically community property or property susceptible to equitable division. Second, how the property is handled and even what happens to it throughout a marriage might influence how it is finally classified.

Community Property versus Equitable Distribution in Business Ownership upon Divorce

A divorcing couple must first establish whether they reside in a community property state or an equitable distribution jurisdiction. In states with community property, practically all property acquired during a marriage is considered joint property, while property owned prior to the marriage is considered separate. Obviously, the law is seldom straightforward, thus exceptions exist. Gifts and inheritances received by one spouse during a marriage are regarded separate property; however, combining them with communal property can alter their status.

In states with equitable distribution, the partition of property is less easy because a judge decides how it should be shared. Obviously, state laws establish specific standards about how property should be split. Additionally, the concept of equitable distribution is that property is divided “fairly” but not necessarily evenly.

When Is a Business Marital Property In the Context of Divorce?

The business will be considered marital property if the couples are co-owners. However, this is not the only method in which a business might be considered marital property. If a business was established after the marriage, it is likely to be regarded marital property.

Sometimes, businesses created by one spouse prior to marriage are not considered marital property. However, this is not always the case. For instance, if the non-owner spouse made contributions to the firm throughout the marriage, it may still be considered marital property. It is vital to remember that “contributed” can refer not just to direct contributions of time to the business, but also to caring for the home while the business owner ran the company.

Using a prenuptial agreement to safeguard business ownership

A prenuptial agreement is the greatest approach to ensure that a business is not subject to property division in the event of a divorce. Occasionally, a spouse may start a business after the wedding, in which case it would be impossible to include it in a prenuptial agreement. However, it is possible to obtain a postnuptial agreement to define business ownership, which is similar to a prenuptial agreement except that it is executed after the couple is married.

Learn whether a court can divide your inheritance in a divorce.

Not necessarily. For purpose of divorce, the law usually categorizes property as either “marital” or “separate.” As a general rule, marital property is subject to division between the spouses; separate property isn’t. This is true whether you live in a “community property” state (like California), which divides property on a 50-50 basis, or an “equitable distribution” state (like New Jersey), which apportions property based on what the court believes is fair under the circumstances.

Is My Spouse Entitled to My Inheritance in Divorce?

That depends on a number of factors, including where you live. Each state’s divorce laws will govern how to address inheritance, in community property states and equitable distribution states as well.

In the overwhelming majority states, an inheritance is considered separate property, belonging exclusively to the spouse who received it and it cannot be divided in a divorce. That holds true whether a spouse received the inheritance before or during the marriage. But in a state like New Hampshire, for example, courts may consider an inheritance to be divisible in a divorce (unless you can persuade a judge that it shouldn’t be).

Now here’s the rub—although your state may initially view an inheritance as separate property, your actions can change it into marital property. Sometimes that happens intentionally in what is called a “transmutation of property.”

An example of an intentional transmutation of property from separate to marital is where a spouse inherits a house, then puts the other spouse’s name on the deed. The spouses move in and share the costs of living there. In that scenario, if a divorce rolls around, the inheriting spouse would be hard pressed to convince a judge that the house was never intended to be marital property.

But let’s say the inheriting spouse never puts the other spouse’s name on the deed, and neither spouse lives in the house during the marriage. At some point down the road, however, the non-owner spouse contributes to improvements which increase the house’s value. At the time of divorce, a judge might determine that—although the house itself may not be marital property—the increase in value specifically due to the improvements is a part of the marital estate, and thus subject to division between the spouses.

The most common example of converting an inheritance to marital property is when the inheriting spouse “commingles” (mixes) the inheritance with marital assets. This can be intentional, but often it happens by mistake. For example, Uncle Zeke passes on and leaves you $10,000 in his will. After you and your spouse break out the bubbly and toast the kindly gentleman, you put the money in an existing savings account that’s in both your names, and which either of you can access at will. If you did that because you wanted to share the inheritance money with your spouse . . . great! Mission accomplished.

But if you thought that putting that money in the joint account was just for convenience, and that it would always remain yours alone, you may have put yourself behind the proverbial eight-ball. By commingling the inheritance with marital funds, you’ve likely converted it into marital property. You can make an argument to the court that this was never your intention, but you’ll have an uphill climb.

Can I Claim My Ex’s Inheritance Received After Divorce?

Sharing a spouse’s inheritance after divorce is a nonstarter, unless your divorce judgment specifically addresses that topic.

That said, there is a situation where an ex-spouse’s post-divorce inheritance could come into play. If you’re receiving spousal support (alimony) or child support, you might be able to petition the court to increase the support amount, based on that inheritance or any interest income the principal is making.

Courts usually allow modification of support—both up and down—for a variety of reasons, such as a job loss, a spouse or child becoming disabled, or a spouse’s substantial pay increase (again, depending on the laws in your state).

You’d first have to see whether your state views an inheritance as a potential basis for a modification request. If it does, you may have viable grounds to seek an increase in support. Of course, this is going to depend in large measure on how significant the inheritance is. Your best bet for success is when the inheritance has substantially enhanced your ex-spouse’s standard of living.

What does the term “separated” mean? Discover the distinctions between trial separation, permanent separation, and legal separation.

When it comes to marriage, separation is not synonymous with divorce—even if you have a court-ordered “judgment of separation.” Separation is when you live apart from your spouse but remain legally married until you obtain a divorce judgment. While a separation does not terminate your marriage, it does affect your financial obligations to your spouse until the divorce is final.

Separation is classified into three types: trial, permanent, and legal. In the majority of states, only one of the three (legal separation) alters your legal status—but all three have the potential to impair your legal rights.

Separation of Trials

If you and your spouse feel the need for a break from the relationship, one option is to live apart while deciding whether to divorce—a process known as “trial separation.” Legally, little changes during a trial separation—all applicable marital property laws remain in effect. For instance, a court will consider the money you earn and the items you purchase during the trial separation to be property acquired by a married person. This frequently means that you and your spouse jointly own the property (depending on your state’s property ownership laws).

If you and your spouse separate but intend to reconcile, it’s a good idea to write an informal agreement outlining the separation rules. For instance, your trial separation agreement may address the following:

• whether you’re going to continue sharing a joint bank account or credit cards.
• how you intend to budget your expenditures
• who will continue to reside in the family home
• how you intend to split expenses, and
• If you have children, discuss how and when you will spend time with them.
• If you decide to divorce, you may be able to use this trial separation agreement as a template for a marital settlement agreement.
• If you and your spouse agree that reconciliation is impossible, your trial separation becomes permanent.

Permanent Distancing

If you live apart from your spouse with no intention of reconciling but are not divorced, the law considers you to be permanently separated.

How Separation from Your Spouse Affects Your Rights

Depending on the local law, a permanent separation may alter the property rights of spouses. For instance, in some states, assets and debts acquired during a permanent separation are considered to belong exclusively to the spouse who acquired them. Once a couple is permanently divorced, each spouse assumes sole responsibility for any debts incurred. Similarly, spouses who divorce permanently lose their right to any property or income acquired by the other.

Why Does the Date of Final Divorce Matter?

Due to the fact that spouses’ rights to each other’s property and obligations to pay debts change significantly as of the date of a permanent separation, spouses frequently argue bitterly about the precise date of their permanent separation. For instance, if your spouse left in a huff and spent a month sleeping on a friend’s couch, but you did not discuss divorce until after the month passed, the date the separation became permanent may be unclear. That means that if your spouse earned a sizable bonus at work during that month, you may be able to argue that you are entitled to a portion of the bonus.

If you move out of the house and do not anticipate a long-term reconciliation with your spouse, reconsider going out or spending the night together just for the sake of old times. If you reconcile briefly, you risk changing the date of separation and becoming financially responsible for your spouse during a time when you believed you were solely responsible for your own.

After you have legally separated from your spouse and reached basic agreements regarding your joint assets and debts, you are not required to divorce immediately. You may choose to remain married for a variety of reasons, including avoiding disruption of your children’s lives or retaining insurance coverage. Or, in some cases, preserving the status quo is simply more convenient than pursuing a divorce. On the other hand, you may decide to divorce as soon as the paperwork is finalized, or when the required separation or waiting period in your state expires.

Is Separation Required Prior to Divorce in My State?

Certain states’ laws require spouses to separate before a divorce can be finalized. State laws governing required separations vary in detail—for example, many states require spouses to live “separately and apart” for a specified period of time before the court will accept a divorce petition (formal request), while others do not require separation until after the petition is filed. If you file before meeting the requirements for separation, the court may dismiss your case. Other states may require spouses to live apart during the divorce process.