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How are premarital assets addressed in divorce?

When a couple divorces and one or both spouses had significant premarital assets prior to the marriage, Connecticut courts will weigh many considerations in evaluating how these assets will be distributed.

If I owned assets prior to my marriage and am now in a divorce, can I keep them?

In a Connecticut divorce, all assets and debts that exist at the time of divorce are subject to equitable distribution by a Connecticut family court. There are a number of statutory factors that a Connecticut family court will consider when determining how to divide the assets and debts equitably. Neither title nor timing of obtaining a particular asset is dispositive of who will retain an asset

If you entered your marriage with assets and are now contemplating or in a divorce, you may wonder whether you can keep them. It depends. In Connecticut, all assets – whether they are titled jointly to the spouses, in either spouse’s name, or jointly to a spouse and someone else – are subject to division and distribution to either or both spouses in a manner that the court deems fair. This “all property” bucket includes premarital assets, which will be presumed to be marital property unless one spouse can convince the court otherwise.

When significant assets are brought into a marriage, such as a house, a sizable inheritance or retirement account, or an interest in a thriving business, the court has the discretion to distribute these assets based on several considerations, including:

  • the value of the premarital assets versus the totality of the couple’s assets
  • the length of the marriage
  • each party’s contribution to the maintenance of the premarital assets and whether those assets were kept segregated or co-mingled with the marital assets
  • the growth of the premarital assets over time
  • each spouse’s income and earning potential after the marriage

How may these considerations affect distribution in a divorce?

A Connecticut family court would weigh these considerations in the context of the totality of the circumstances to reach a fair distribution of property in the divorce. If the premarital assets represent a significant portion of the value of the marital assets, the judge may find it unfair to distribute in the divorce all of the premarital assets to the one spouse who brought them into the marriage.

The length of the marriage is also an important consideration in a divorce. If you brought significant premarital assets into the marriage but the marriage lasted 45 years, the judge may be less likely to remove those assets from the marital property versus if the marriage only lasted, say, two years before the divorce.

Each party’s contribution to the maintenance of the assets is also a consideration in a divorce. Say you had an inherited IRA from a relative. Throughout your marriage, the IRA sat there, quietly accumulating value and requiring very little attention from you or your spouse. Sometimes the court may say it’s equitable to segregate it, allow the person who inherited it keep it, and not consider the IRA when dividing the remaining marital property.

Premarital assets are often co-mingled into the marital estate, such as when someone cashes in an IRA and takes the family on a world cruise. In such a case, the court typically would not try to reconcile those funds and will be more likely to declare it marital property.

Real estate is generally an easier category for the courts to separate out from other types of property. For example, if you inherited $100,000 and used that money for a down payment on a house just before you were married, it is simpler to show your premarital inheritance’s use because there are real estate closing documents.

Depending upon the length of your marriage, the size of the premarital asset in relation to the entire marital estate, and the growth or loss in value of the asset during the marriage, the court could exclude the entire premarital asset from marital property to be divided between you and your spouse. The court could include the premarital asset in the marital property to be divided. The court could look at the growth during the marriage and award a certain percentage of said growth during the marriage to each spouse.

There is no statutory formula; it comes down to what the court considers fair and equitable under all the facts and circumstances.

What can I do to strengthen my claim for my premarital assets?

If you owned an asset prior to marriage, it’s important to demonstrate to the family court the historical value of the asset as of the date of marriage. This may be difficult to produce. If your aunt gave you an account 40 years ago, you are going to need statements from when you received it and the value of the account at the time of your marriage as well as today. Depending on the type of asset, it may not be easy or even possible to prove the value of the asset at the time of your marriage.

Say you have a 401(k) that you can show was worth $100,000 at the time of your marriage. The value of the account appreciated and you continued to pay into it for many years, and now it’s worth $500,000. Depending on the circumstances, the court may or may not return the $100,000 to you, but a court could say that the appreciation that occurred is marital property. Often, with the help of a financial professional, actuarial evidence may be produced to quantify the appreciation on the premarital funds, in order to have that appreciation excluded from the marital assets as well as the original premarital amount. If the judge does not like the other spouse, because of bad conduct, or if the other spouse has equal earning power and future prospects, the judge may allow you to retain both the premarital contribution and the appreciation on that contribution. However, if the other spouse is a stay-at-home mother with three children who has not been in the traditional workforce contributing to her own IRA, and has no current earnings, the court may be less likely to agree with these actuarial presentations.

Also keep in mind that the less you have co-mingled your asset into the rest of the marital estate, the more likely the court will be to consider removing it from the marital property.

What about premarital debt?

The courts are given the same discretion to deal with premarital debt as premarital assets. However, certain types of debt, notably student loans, often stay with the individual who incurred them.

What about if there is a premarital agreement?

The best way to protect significant premarital assets is with a premarital or prenuptial agreement. Premarital agreements often address what happens to premarital assets in the event of death or divorce. If you have such an agreement, it has become increasingly more likely that the court will honor the premarital agreement and that you will get to keep the assets that you had prior to marriage, provided the premarital agreement does not violate Connecticut statutes or public policy and that enforcing the agreement was conscionable at the time you and your partner signed the agreement and now when it is being enforced. Unconscionability generally means that one spouse cannot become a ward of the state or be rendered unable to take care of the children financially if the terms of the premarital agreement were enforced by the court.

As Connecticut-based family lawyers at Ruel Ruel Burns Feldman & Britt, we have represented both sides in divorces involving significant premarital assets in Connecticut. This experience provides us with many perspectives and insights to effectively approach divorces involving significant premarital assets and other complex divorce matters. Contact the Connecticut family law attorneys at Ruel Ruel Burns Feldman & Britt at 860-206-9096.