Marriage Is A Commingling Of Assets And Debt
Marriage, Money, and Debt
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. While one may balance their accounts daily, another may wait until the end of the week to do so. One party may prefer to have bill payments debited automatically from bank accounts, the other may prefer mail. Methods of spending and budgeting might have worked before marriage, but afterwards may not in the least.
Misunderstandings about money can lead to arguments and frustrations in a marriage. To avoid these conflicts, smart couples discuss and create realistic plans about managing their marriage including finances and debts. 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. After marriage, debt that a person acquired beforehand is not automatically attached to a new spouse. However, depending upon how finances are handled after marriage, a new spouse can feel the sting of their spouses former debt. For instance, commingling assets after marriage can lead a creditor to attaching those assets in order to collect on a debt. Also, the IRS is empowered to place a lien on any refunds due to a person because of unpaid taxes, student loans or other government loans. If a couple has a joint tax return, they may be surprised to find the return is not what they expected at all.
If one spouse incurs excessive debt after marriage, are both spouses liable?
Maybe. A firm will respond according to the laws of the state the couple resides in. 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. Couples can forearm themselves against the risk by being aware of federal and state laws concerning any issues of debts and joint assets in a marriage.
How do the courts view real property that a spouse owned before marriage?
Typically, property owned before marriage is considered separate property of the individual who held it prior to the marriage. However, if the non-owning spouse ever contributes their own money toward mortgage payments, repairs to the property, general maintenance or helps make improvements to the property, or if this spouse has free access to the property, the courts may then view the propertys ownership a little differently. This all depends on the applicable state law the couple lives in, how long they are married, and the specifics of time and money the non-owning spouse invested in the property.
The financial considerations of marriage, debt and the commingling of assets are all very important discussion points for people who are considering spending their lives with another. While these issues do present major stumbling blocks to some, those who are unafraid to discuss and plan for these realities find that they fare a lot better as a result. 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.
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