Protecting Your Personal Assets and Inherited Property

Whether it’s a business you own and run or a home that has been in the family for generations, there are some possessions that you absolutely do not want to lose in a divorce. However, without paying close attention, a spouse can claim a right to the asset as part of the marital estate and demand a share as part of the divorce. Some crucial steps can be taken to ensure that you do not lose your separate property in a divorce.
How is Property Treated in a Divorce?
Under Maryland law, any asset acquired during marriage is considered marital property regardless of which spouse holds title, unless explicitly classified as separate. Certain assets are considered separate, including property owned before marriage and property received by one spouse as a gift or inheritance. However, these separate property items can become marital assets – in whole or in part – if they are “commingled” with marital property. For example, if the home is owned prior to marriage by one spouse, but during the marriage, improvements or mortgage payments are made with marital assets, the other spouse may be entitled to an ownership interest in the house.
Steps to Protect Separate Property
At each phase of a relationship, there are affirmative steps a person can take to protect their separate property.
1. Before Marriage
If you have separate property that you want to protect, get out ahead of the issue before getting married. One option is for the parties to create a prenuptial agreement that identifies items of separate property, and each party explicitly waives any claim to that property in the event of divorce.
If this is not a welcome approach, set up separate accounts, safeguard titles and other proof of ownership, and plan to keep these assets separate from shared finances and marital property. During your marriage, continue these practices with the pre-marital assets and any separate property you obtain. Some assets, such as a home or a business, may require additional planning to prevent unintentional commingling. Confer with an experienced family law attorney and a tax professional to ensure you are managing these assets correctly.
2. When Contemplating Divorce
If divorce is on the horizon, take stock of your assets to identify property you wish to protect from marital claims. Then, proceed to gather evidence and organize your assets. Evidence can come in a variety of forms, including:
• Original wills or gift deeds showing the transfer of inherited property.
• Bank statements or account records demonstrating that funds remained separate.
• Receipts for major purchases made exclusively with your personal funds.
• Communications with your spouse that confirm their recognition that the property is separate.
3. Handling Commingled Assets During the Divorce Process
In cases of commingling, it is still possible to keep your property. To start, aim for amicable negotiations with your spouse. Advocate for a division that fairly allocates commingled assets to you, especially if you can prove initial ownership. Collaborate with financial experts to trace your individual contributions to the commingled asset. Detailed financial records can help identify the portion that belongs to you. Consider compromises that allocate your property to you in exchange for ceding some part of the marital estate to your spouse. If direct negotiation fails, consider mediation or arbitration, where neutral parties assist in resolving property disputes.
When your marriage ends, it may be too late to protect your separate property. Planning, foresight, and a strategic approach to the divorce process can go a long way towards ensuring that you do not lose part or all of these assets in the divorce.