MONEY MATTERS DURING MARRIAGE

Ownership of Property

 

Q. Which spouse owns what property in a marriage?

A. Most property that is acquired during the marriage is considered marital or community
property. For example, the wages earned by both husband and wife during the marriage are
considered marital property. If one or both spouses buy a house or establish a business during
the marriage, that usually will be marital property, particularly if the house or business is
purchased with the husband’s and wife’s earnings.
Separate property is property that each spouse owned before the marriage. It also
includes inheritances and gifts (except perhaps gifts between spouses) acquired during marriage.
During the marriage (and afterwards), each spouse usually keeps control of his or her separate
property. Each spouse may buy, sell, and borrow money on his or her separate property.
Income earned from separate property, such as interest, dividends, or rent are generally
separate property. However, in some states that recognize community property, these profits
may become marital property.
Separate property can become marital property if it is mixed with marital property. If, for
example, a wife owned an apartment building before the marriage and she deposited rent
checks into a joint checking account, the rent money probably would become marital property,
although the building is likely to remain the wife’s separate property as long as she kept it in her
name. If the wife changed the title on the building from her name alone to the names of both
herself and her husband, that probably would convert the building into marital property. In
addition, if one spouse put a great deal of work into the other spouse’s separate property, that
could convert the separate property into marital property, or it could give the spouse who
contributed the work a right to some form of payback. A later section in this chapter will discuss
how courts divide marital property in a divorce.

 

Q. May a couple own property together?

A. Yes. In community property states, this occurs automatically. Ten states—Alaska, Arizona,
California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, as
well as Puerto Rico—use the community property system. These jurisdictions hold that each
spouse shares equally the income earned and property acquired during a marriage. This is true
even if one spouse supplied all the income. In the other states, spouses probably share property
under one of the following three forms of co-ownership:
· Joint Tenancy. A form of ownership that exists when two or more people own property that
includes a right of survivorship. Each person has the right to possess the property. If one
partner dies, the survivor becomes the sole owner. Any two people–not just spouses–may
own property as joint tenants. A creditor may claim the debtor’s interest in joint tenancy
property.
· Tenancy by the Entirety. Allowed only in some states, this is a type of co-ownership of
property by a husband and wife. Like joint tenancy, it includes a right of survivorship. But a
creditor of one spouse may not “attach” (seize) the property. Each party usually must
consent to the sale of the property. Divorce may result in a division of the property.
· Tenancy in Common. This form of co-ownership gives each person control over his or her
share of the property, and the shares need not be equal. The law does not limit tenancy in
common to spouses. A tenancy in common has no right of survivorship; when one spouse
dies, his or her share passes to the heirs, either by will or state laws.
Tenancy rules vary from one state to another. Some tenancies are complex and must be
created in a precise manner, otherwise the courts may not enforce them.

 

 


Q. Is a husband or wife responsible for debts incurred by the other?

 

A. That depends on the nature of the debt as well as where the couple live. If both husband and
wife have co-signed for the debt, both will be responsible for paying it. For instance, assume the
husband and wife apply together for a charge card. If both sign the application form and
promise to pay the charge bills, both will be responsible for paying off the balance to the credit
card company or store, even if only one of them made the purchases and the other
disapproved. Similarly, if a husband and wife co-sign on a mortgage for a home, both of them
are potentially liable to the mortgage company, even if one of them no longer lives in the home.
In community property states, a husband and wife may likewise be responsible for debts
incurred by the other.

 

Q. Is a husband or wife liable for the debts of the other without co-signing for the debt?

A. That again depends on the nature of the debt and where the couple lives. Some states have
“family expense statutes” that make a husband or wife liable for expenses incurred for the benefit
of the family, even if the other spouse did not sign for or approve of the expense in advance.
Still other states impose this family expense obligation by common law without a statute. Thus, if
the wife charged groceries at a local store or took the couple’s child to a doctor for care, the
husband could be liable because these are expenses for the benefit of the family. On the other
hand, if the wife runs up bills for a personal holiday or the husband buys expensive coins for his
coin collection, the other spouse normally would not be liable unless he or she co-signed for the
debt. Again, in community property states, a husband or wife is generally obligated for the debts
of the other.

 

Q. Is one spouse responsible for debts the other spouse brought into the marriage?

A. Not in most states. In states that do not recognize community property, such debts belong to
the spouse who incurred them. But in community property states, a spouse may, under special
circumstances, become liable for the other spouse’s premarital debts. See the
chapter on consumer credit.

 

Q. Do a spouse’s credit rights depend on marital status or the other spouse’s financial
status?

A. The law forbids denying credit on the basis of marital status. See the chapter
on consumer credit.

 

Q. Which spouse is responsible for paying taxes?

A. If each spouse’s name appears on a state or federal personal income tax return, both parties
signing the return are liable for the taxes. If a couple files jointly, the Internal Revenue Service
generally holds each one responsible for the entire debt. A spouse who files as Amarried filing
separately@ is not responsible for the other=s debt.

 

Q. Do the tax laws penalize married couples?

A. That depends on the tax bracket of each person. If one has a high taxable income and the
other a relatively low taxable income, they will generally pay less income tax if they are married
and filing a joint return than they would pay if single and filing as single persons. They also will
pay less by filing a joint return than by filing separate returns (as married persons). For couples
in which both wife and husband have a high income, the total tax will be higher for those who file
jointly.
Years ago, there were stories about financially well-off married couples who would go to
the Caribbean each December, obtain a divorce, file tax returns as single persons for that year
to save money, and then remarry in the new year. Such a practice could be regarded as tax
fraud. In any case, the savings are not as great as they were in years past.

Q. May one spouse make a tax-free gift to the other spouse?

A. A person may give his or her spouse any amount of money without paying federal gift taxes if
the spouse is a U.S. resident. However, it must be an outright gift or set up as a proper trust.
Most, but not all, state laws have done away with taxes on gifts between spouses. But the same
is not true with respect to gifts to other family members. Gifts to children or other relatives may
be taxable if they exceed a certain amount per year.

 

 


Q. May husbands and wives go into business together?

 

A. Certainly. Wives and husbands can be business partners, just as any other two people,
whether related or not. They could set up a corporation and both be owners and employees of
the corporation; they could form a partnership; or one could own the business and employ the
other. Wages and benefits can be paid, just as they would for any other employee. If wages and
benefits are being paid to a spouse or child, the amount usually should not be more than what is
reasonable or a fair market value. If artificially high payments are made, the business could get
into trouble with the Internal Revenue Service.

 

Q. Is a wife or husband liable for the other’s business debts?

A. Usually, no–unless the husband or wife had co-signed on the debt or they reside in a
community property state. It is common, however, for institutions that lend money to small
businesses to want personal guarantees of payment from the owner of the business, and not just
from the business itself. In the event the debt is not paid, lenders would like as many pockets to
reach into as a possible. If the owner of the business owns a home, the lender may want to use
the home as collateral for the business loan. That means that the spouse of the business owner
may be asked to sign a paper allowing use of the home as collateral. Thus, the home could be
lost if the business cannot pay off its debts. As long as a spouse does not co-sign for the
business debts, the spouse normally will not be liable for business debts incurred by his or her
mate. An exception may exist in community property states.

 

Q. May a couple file jointly for bankruptcy?

A. Yes. Bankruptcy provides relief for people who have more debts than they can pay.

 

Q. Must a working spouse provide a pension for a dependent spouse?

A. The law does not specifically require this, but most pension plans provide for it. Also,
depending upon the type of pension plan, a dependent spouse is given certain rights under
federal law regarding the working spouse’s pension benefits. See  “The Rights of
Older Americans.”

 


Q. What are legal remedies for domestic violence?

 

A. State legislatures and courts have been paying increasing attention to domestic violence.
Many states have elaborate laws designed to protect spouses from domestic violence by their
spouses or other family members. In many states, protection also is available for people in
dating relationships that have become abusive. A common remedy is for a court to issue a
“protective order” ordering the alleged abuser to stop abusing or harassing someone else. In
addition, the orders often will order the abuser to stay away from the spouse, the spouse’s
home, or place of work. If the person continues to abuse his or her spouse (or another person
protected by the order), the abuser can be charged with a criminal violation of the order in
addition to being charged with other offenses, such as battery.

 

Q. What kind of actions are considered domestic violence.

A. Domestic violence statutes in most states apply not only to physical attacks, but also to other
types of conduct. Some examples of conduct that could be considered domestic violence:
creating disturbance at a spouse’s place or work, harassing telephone calls, surveillance and
threats against a spouse or family member (even though the threat may not have been carried
out).

 

Q. Do protective orders actually protect the victim of domestic violence?

A. In many cases, yes. Studies have shown that issuing a protective order or arresting a person
who commits an act of domestic violence does reduce future incidents of domestic violence.
When perpetrators of domestic violence see that the police and court system will treat domestic
violence seriously, many persons who commit domestic violence may be deterred from future
violence. But orders of protection are not guarantees of protection or safety. For some
individuals with intense anger or rage, no court order will stop their violence, and a court order
might even add to the rage. Newspapers periodically carry stories of women murdered by their
husband or boyfriend despite numerous arrests and orders of protection. The legal system
cannot offer perfect protection, although it can reduce violence.

 

Q. Where does one turn for help in cases of domestic violence?

A. In a crisis situation, a call to the police is a good place to start. Many people complain that
police do not take accusations of domestic violence seriously. That can be true in some
circumstances, but on the whole, police are treating domestic violence situations more seriously,
and police officers are receiving increased training on the subject. The local state’s attorney or
district attorney also may be able to offer some help. An increasing number of hospitals, crisis
intervention programs, and social service agencies have programs to help victims of domestic
violence. Agencies offering help in cases of domestic violence might be found in the Yellow
Pages under “Domestic Violence Help,” “Human Services Organizations,” or “Crisis
Intervention.”

 

 

 

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