Most married couples decide to jointly share their property and other assets. This makes intuitive sense since in most cases one spouse wants to leave all property and monetary assets to the other spouse. There’s little need to worry about which assets belong to whom: All of the property simply transfers to the other spouse in most circumstances. Marital Property Agreements are for couples who wish to denote how property is shared in the case of divorce.
Separate and Marital Property
There are some more complicated ways to divide property, though, among more than one beneficiary. For instance, marital property acts in many states allow for giving away shared marital property to a third-party recipient.
More broadly, the nuances of how property gets passed on depend on whether property is marital property or separate property as well as specific common law practices in particular states.
Marital property would be any property, earnings or assets that a spouse brought in during a marriage. Everything from a home or family vehicle to the earnings that one spouse brought to the marriage and put in a joint savings account could all be considered marital property.
Separate property, on the other hand, belongs solely to one spouse. Inherited money or inherited property are usually the two most common forms of separate property. Both of these predated the actual marriage – i.e., one spouse had property rights or an inheritance prior to the wedding day.
Post-nuptial agreements and marital property agreements are ways in which one spouse can claim assets or property following a separation, divorce or death. Both post-nuptial agreements and marital property agreements can dictate how marital property and separate property get handed down once one spouse is out of the picture.
Marital Property Agreements
The basis of marital property agreements and marital property acts in the common law system is the realization that each spouse contributes something unique to a marriage.
Marital property acts dictate that property and assets acquired during a marriage are shared equally as marital property among both spouses. This often translates to an underemployed spouse having easier access to credit and the ability for one spouse to make decisions about how monetary and property assets should be divided later on.
So, where exactly do marital property agreements enter the picture? Marital property agreements offer spouses the opportunity to render part or all of marital property shared among both spouses separate property held by only one spouse.
It can work the other way around as well, however: one spouse can turn previously separate property (e.g., an inherited estate) into marital property through a marital property agreement.
Put another way, in states that allow marital property agreements as a common law practice, one spouse can turn individual, separate property into shared marital property or vice versa. Marital property agreements give spouses more control over how their assets get divided during the marriage or after the marriage has ended.
Logistics of Marital Property Agreements
One spouse opting to turn marital property into separate property can make sense under certain circumstances.
There are tax incentives, inheritance laws and estate planning procedures that can make an intelligently executed marital property agreement a win-win for both spouses.
In California and other states that allow marital property agreements, there are some rules that each spouse must follow in order for a marital property agreement to be legally enforceable.
The marital property agreement should be in writing and signed by both spouses. Both spouses must also have full knowledge of each other’s financial circumstances going into the agreement.
Each couple’s legal needs and financial circumstances differ such that one couple might decide to share a lawyer whereas another might hire separate lawyers.