Commingling assets and debts upon marriage
Debt, Marriage, Lawyers, Guns and Money
During the course of a marriage, debt is often a major issue between spouses. Prior to tying the knot, most people have developed their own habits of saving money, budgeting, paying bills and spending, in general. One may balance accounts daily, others might do so weekly. One person may prefer to have their bill payments automatically debited from their checking account, while the other prefers to mail their payments. These methods of budgeting and spending may have worked fine before marriage, but afterwards, these spending actions may not go over as smoothly.
Misunderstandings about money can lead to arguments and frustrations in a marriage. In order to avoid such clashes, smart couples engage in discussing and creating realistic plans about how they will manage their marriage, debt and finances. Some even go so far as to create a prenuptial agreement, as well as familiarizing themselves with state and federal laws pertaining to marriage, debt, and the commingling of assets.
Here are a few of the most common concerns about marriage debt, joint finances and assets:
Does bad debt one person has before the marriage attach it to their new spouse too?
No. Post marriage, debt that someone incurred previously isn't automatically attached to their new spouse. Depending on how the finances are handled after marriage, new spouses can feel the sting of their partner's debts. For instance, if couples commingle their assets after marriage, a creditor can attach those assets in an attempt to collect on any premarital debt. The IRS is also empowered to place a lien on refunds due to unpaid taxes, student loans or government loans. In cases where a couple has filed a joint tax return, many are surprised to find out that the refund they were expecting is reduced or will not be received at all.
If one spouse incurs excessive debt after marriage, are both spouses liable?
Maybe. Mostly, a firm answer depends upon the state in which the couple resides. Also, if one spouse files bankruptcy as a debt management strategy, creditors can pursue repayment from a non-filing spouse if the two were legally married at the time that the debt was incurred. In marriage, debt liability presents a major risk. However, couples can better arm themselves against such risks by knowing what state and federal laws have to say about any potential issues pertaining to marriage, debt liability, and joint assets.
How do courts treat real property a person owned before a marriage?
Typically, property owned before marriage is considered separate property of the individual who held it prior to the marriage. That said, if a non-owning spouse contributes to mortgage payments, repairs, maintenance or improvements, or has free access to the property, the court can take a slightly different view. Again, this depends on the state in which the couple resides, how long a couple is married, as well as the specifics regarding the time and money that the non-owning spouse put into the property.
Financial considerations are involved in a marriage, as well as debt and commingling assets, and they have to be discussed by people considering spending their lives together. These issues present obstacles to some, but people that aren't afraid to discuss and plan for them find they fare a lot better resultantly. For couples who choose to sign a prenuptial agreement or simply familiarize themselves with state and federal laws governing marriage, debt and the protection of assets, many of these issues come as no surprise.
