Getting Married? Tips You Should Know in the (Hopefully Unlikely) Event of Divorce
By Ashley DeCress, CPA, ABV, CVA, Senior Manager, Advisory Services
We’ve all had our fill of tricks and treats after enjoying spooky season, and although there were plenty of horror stories about serial killers, ghosts and goblins, there’s no horror story quite as scary as a divorce. Although divorce is the very last thing a couple wants to think about when planning a wedding, it doesn’t hurt to be prepared.
Under Ohio law, all assets accumulated during the marriage are generally divided equitably between the parties in the event of divorce. However, certain property may be considered separate property and not subject to division if one spouse owned it before the marriage or if they received it by inheritance or gift during the marriage. Each of these items of separate property are subject to the burden of proof to determine whether they must be equitably divided in the case of divorce.
Here are some helpful steps to take before marriage to ensure you are in a good position for such an event:
- Create a folder (hardcopy or electronic) of your account statements (including retirement accounts) that show your assets and account balances prior to the date of marriage and continuing throughout the marriage.
Tracing separate property is a major issue couples often face in divorce. If you don’t have the necessary account statements, it can be a headache to track them down after the fact. Income and retirement contributions made prior to the marriage would be considered separate assets and not subject to division between the parties. However, contributions after the date of marriage are considered marital (or community) property.
If detailed records are kept, certain assets (such as retirement contributions) can be traced to determine the portion that is subject to division between parties.
- Are you receiving substantial sums of money through an inheritance or gifts? If so, you should deposit this separate property into its own account (with no other deposits) to keep the identity of the funds separate and traceable to their source.
You may have heard the term “commingling assets.” Think of your inherited/gifted funds as salt and your community property as pepper. If you kept the salt and pepper in separate shakers, you would easily be able to see which is which and trace each to its source, thereby avoiding a division of that property during divorce. However, if you put your salt and pepper into the same shaker, it may take a lot of time and effort to separate all of the individual grains.
- Do you receive rental income from separate property purchased before the marriage? You may want to keep these funds in a separate account, like you would inheritances or gifts.
- Do you own real estate that was purchased prior to marriage? If so, keep in mind that if community funds are used to pay off the mortgage debt or make any improvements to the property after the date of marriage, then a portion of the real estate would no longer be separate.
No one likes to talk about the potential for divorce, but it is better to be knowledgeable and plan for all scenarios, not just the “we will live happily ever after” scenario. Just like any horror movie where you scream at the actor to “‘just turn on the lights,” Marcum is here to say “just collect and retain the necessary information” so your experience is as unexciting as possible.