Marital and Non-marital Assets

Nobody says ‘I do’ thinking that their marriage won't last. However, it is a sad fact that a large number of marriages do fail, with current figures somewhere between 30 and 40 per cent.

When couples decide to divorce, there can often be bitter wrangling over the financial and proprietary aspects of the marriage.

Generally, if one person has control over the finances during the marriage, the other party will be at a considerable disadvantage when it comes to the divorce proceedings.

Every marriage concerns an element of interdependence but when a couple divorces there is a need to divide assets, money and other property. However, these are broadly divided into two categories, ‘marital’ and ‘non-marital’ assets.

What Are Marital and Non-Marital Assets?

If you have assets that you owned before the marriage, such as money or property that you have inherited, payouts from personal injury awards or other legal settlements, or gifts that you receive during the marriage that were not intended as ‘family’ gifts, these are non-marital assets.

For example, you as an individual inherit a painting that you then sell at auction. If you deposit the proceeds into a joint bank account, or spend some or all of the money on your spouse or joint assets, this property then becomes marital property. There are ways to identify and track liquidated non-marital assets, but these procedures are seldom straightforward.

How to Protect Your Assets

In order to protect your non-marital assets from being counted as marital, always remember to keep them separate. If you are not yet married, consider talking to your future spouse about the assets that you both have and what you both intend to keep as your own. Although it’s not exactly romantic, it can help to avoid considerable emotional wrangling and bitterness in the future if the marriage fails.

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Stay Credit Worthy

Keeping your own assets separate in a marriage is particularly important if you are at a financial disadvantage, e.g. if you are not working, are working but earn considerably less than your spouse, or if you are at home caring for children. Some spouses, usually wives, can rely solely on their husband’s means all their married lives and when it comes to divorce they can discover that they are barely credit worthy.

As a result it is vitally important that you retain a good credit rating, so that if you find yourself single again you are able to support yourself and obtain credit from lending institutions. The easiest way to do this is to have a credit card in your sole name. However, it is equally important to maintain your payments on this account, as a bad credit rating is as bad, if not worse, than having no credit history at all. Also, make sure that you are named on all the household accounts.

Keep a Record

Although it may seem cynical, it is also wise to make sure you keep yourself up to date as to the extent of your and your spouse’s assets from time to time. Make sure you have copies of proof of ownership, as in the event of a divorce these can go ‘missing.’

Finally, if you are on the brink of divorcing your spouse, make sure that you close any joint accounts immediately. The last thing you want is to be subsidising your spouse (and perhaps directly or indirectly their legal fees) after you have separated.