Family Law,Money matter

Ownership of Property

Which spouse owns what property in a marriage?
Most property that is acquired during the marriage is considered marital or community property. If one or both spouses buys a house or establishes a business during the marriage, that property will usually be considered marital property, particularly if the house or the business is purchased with the husband's and wife's earnings obtained during marriage.
Separate property is property that each spouse owned before the marriage. In most states, separate property also includes inheritances and gifts (except perhaps gifts between spouses) acquired during marriage. During the marriage (and afterward), 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, is generally separate property. However, in some states, these profits may become marital property.
Separate property can become marital property if it is mixed or commingled 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 would probably 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 repayment for the work performed.
What is the community property system?
Eight states--Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington--plus Puerto Rico have adopted a different concept of the relationship of husband and wife, which is rooted in Spanish law. Though these states may differ a good deal on the specifics of their law, in general they consider any property acquired during a marriage, except by gift or inheritance, to be community property. This is true even if one spouse supplied all the income. Each spouse owns half of the community property. Each may transfer his or her interest without the other's signature. But there's no right of survivorship; when one spouse dies, half of the couple's property--including half of the house--goes through probate.
A ninth state, Wisconsin , has certain community property features in its law. A tenth state, Alaska , changed its law in 1998 to allow married seniors to select community property as an alternative form of ownership of their property. A couple may voluntarily decide to enter into a written community property agreement or community property trust, but, if they don't choose to do that, their property will not be held as community property.

Debts and Taxes

Is a husband or wife responsible for debts incurred by the other?
That depends on the nature and timing of the debt as well as the state in which 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 entire balance to the credit card company or store, even if only one of them made the purchases and the other disapproved of those purchases. Similarly, if a husband and wife co-sign on a mortgage for a home, both of them are 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 be responsible for debts incurred by the other even if both parties do not co-sign on the debt.
Is a husband or wife liable for the debts of the other without co-signing for the debt?
That again depends on the nature of the debt and where the couple live. 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 personal 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 responsible for the debts of the other, even in the absence of a cosignature.
Is one spouse responsible for debts the other spouse brought into the marriage?
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.
Do a spouse's credit rights depend on marital status or the other spouse's financial status?
The law forbids denying credit on the basis of marital status. See chapter 7, "Consumer Credit."
Which spouse is responsible for paying taxes?
If names and signatures of both spouses appear on a state or federal personal income tax return, both parties are liable for all of the taxes. If a couple files jointly, the Internal Revenue Service generally holds each one responsible for the entire debt, although an innocent spouse who is not aware of income that has been concealed by the other spouse may not be responsible for unpaid taxes on the hidden income. A spouse who files as "married filing separately" is not responsible for the other's tax debt.
May one spouse make a tax-free gift to the other spouse?
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.

Doing Business Together

May husbands and wives go into business together?
Certainly. Wives and husbands can be business partners. They can set up a corporation and both be owners and employees of the corporation; they can form a partnership; or one spouse can own the business and employ the other. Wages and benefits can be paid, just as they are for any other employee. If wages and benefits are being paid to a spouse or a 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.
Is a wife or husband liable for the other's business debts?
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 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 will not normally be liable for business debts incurred by his or her mate.
May a couple file jointly for bankruptcy?
Yes. Bankruptcy provides relief for people who have more debts than they can pay. See chapter 8, "Consumer Bankruptcy," for more information.
Must a working spouse provide a pension for a dependent spouse?
No. The law does not specifically require this, but most corporate pension plans provide for it. Generally, a pension from a corporation that provides benefits for a surviving spouse cannot be taken away from the surviving spouse without that spouse agreeing to it in writing. See chapter 16, "The Rights of Older Americans," for more information.