Division of assets during the divorce process can be a touchy subject! Here is why..
My spouse never put any money in my retirement account why do I have to consider giving them part of my hard earned money is a question that I receive often. It’s hard for clients to understand why they are forced to divide assets that a party had no actual effort in earning or saving. The answer is equity. Georgia is an investment state and a state that will consider all assets and debts accumulated during the marriage as divisible in equity. What this essentially means is that the court has the discretion to do what the court considers fair.
MY SPOUSE NEVER WORKED, WHY SHOULD THEY GET HALF OF MY 401K?
The length of marriage is an important consideration when discussing these issues as longer marriages tend to have greater assets and a greater claim in equity by the other spouse. If you have five hundred thousand in your 401K and your spouse was a stay at home parent during the entire marriage, the court will consider this spouse’s efforts in allowing you to earn and invest this money. The fact that the nonworking spouse did not deposit earned assets into this account does not reduce the claim this spouse has on these marital assets. This is difficult for many clients to understand. This is also an issue when considering a business started by one spouse.
Division of assets in business during the Divorce
Business division is very complicated as the first step is determining the value of the business, which usually involves a business valuation by an independent accountant. Once this valuation is established the equitable argument begins. What was the other spouse’s involvement, financial and personal? Once again clients are confused that the spouse who never stepped foot in the business nor contributed anything to the business has a claim on the assets of that business.
On the other hand, some clients are confused that they are not entitled to assets accumulated before marriage. Georgia is not a community property state and as such assets accumulated before marriage are usually not divisible. So if you are divorcing after a shorter marriage and your spouse has a large portfolio you can usually only claim the portion of assets accumulated during the actual period of marriage. If one spouse inherits or is gifted property, this is also not divisible as marital property. However, like all issues in equity, there are exceptions.
Division of assets from an inheritance
Inheritance or gifts granted before the marriage and even during the marriage should never be comingled with marital assets nor converted to new marital assets. Many clients inherited a great deal and assume after they do their internet research that their spouse has no claim on these assets; however, long ago they removed that asset from a separate account in their name only and bought real estate or annuities. They began using that money to pay marital debts or household expenses; or, while still in love, they opened an account and combined these funds in their spouse’s name. When this is done these inherited or gifted assets, become marital property, and the other spouse has and, equitable claim.
DIVISION OF ASSETS – PRENUPTIAL AGREEMENTS – DO THEY HELP?
Often the reason for a prenuptial agreement is to protect from the possibility of being responsible for sharing assets that were acquired before the marriage in case of a divorce when they have accumulated a substantial portfolio. Georgia does recognize these Prenuptial agreements, and these agreements have been discussed in prior entries.
What issues can a prenuptial agreement cover?
The main purpose of a prenuptial agreement is to allow you to decide how to divide or retain property in the event of a divorce. The agreement may also state whether one spouse will pay the other alimony if the marriage ends. A prenuptial agreement can never determine Child Support or Custody of a child (children), as only the judge can decide on such issues in case of a divorce.
A prenuptial agreement can help you identify what assets and debts each spouse is bringing to the marriage. Typically, a prenuptial agreement will list what each person owns and owes at the time of the marriage, so there’s no argument about it years later.
The agreement may also determine how the couple will divide property and income that they accumulate during the marriage. For example, you can agree that each spouse will automatically keep the car they drive most often if the marriage ends, or that each spouse will keep their own business interests, retirement accounts, and personal credit card debts.
A prenuptial agreement cannot, however, take away a spouse’s responsibility to pay the debts they have at the date of the marriage itself. If you are facing divorce, make sure to protect yourself by getting accurate information from a qualified attorney.
Always, seek legal counsel when going through a divorce. There are many factors which will determine how a judge will equitably divide marital assets and debts; from current statues and precedent to the personality and tendencies of the court and a knowledgeable attorney will always guide you to the most beneficial result.
Even personal savings acquired during the marriage are considered part of the marital assets and are subject to division. Need to know more? Contact us at firstname.lastname@example.org or schedule your consult by phone or online.