THE 411 ON PROTECTING YOUR PROPERTY IN THE EVENT OF A DIVORCE
July 5, 2015
Whether you think you and your spouse will remain together forever or not, it is nevertheless essential to take proactive measures to protect your separate property. Understandably, it is hard to contemplate getting a divorce, especially during the fun and exciting time spent planning your wedding and heading off to a remote island for your honeymoon. However, what happens when the honeymoon is over, your grandmother dies and leaves you $200,000 in her will. Or, you owned stock prior to taking the marital plunge and now think divorce is on the horizon? With approximately 50% of marriages ending in divorce, it is important to be familiar with how Missouri law treats this situation and also, what proactive steps you can take to protect your separate property and most importantly, to keep it that way.
According to RSMO Sec. 452.330.4, "[p]roperty which would otherwise be non-marital shall not become marital property solely because it may have become commingled with marital property." In other words, Section 452.330.4 clearly indicates that such commingling, without more, will not transmute separate property into marital property. In re Marriage of Smith, 785 S.W.2d 764, 766 (Mo. App. E.D. 1990). Notwithstanding, "the placing of separate property of a spouse into the joint names of both spouses creates a presumption that the property transferred becomes marital property and clear and convincing evidence is required to show the transfer was not intended as a gift." Montgomery v. Montgomery, 18 S.W.3d 121, 124 (Mo. App. S.D. 2000); Dunsford v. Dunsford, 671 S.W.2d 282, 283 (Mo. App. E.D. 1983); Conrad v. Bowers, 533 S.W.2d 614, 624 (Mo. App. E.D. 1975).
In order to overcome the aforesaid presumption, a party must be able to demonstrate to the court that the property is separate by tracing the funds to their origin and segregating them from the marital interest. Drikow v. Drikow, 803 S.W.2d 122, 126 (Mo. App. E.D. 1991); Stidham v. Stidham, 136 S.W.3d 74, 82 (Mo. App. W.D. 2004)(due to party's commingling of marital and separate property, he bears the burden of tracing his separate funds to the money left in his deposit account). Generally, Missouri case law demonstrates that most parties are unable to sustain their burden of tracing back to the origin of their alleged "separate" funds.
For example, in Drikow, the trial court found that an account that served as a clearinghouse for Husband's investments was initially separate property derived from husband's inheritance. Drikow, 803 S.W.2d at 126. With the exception of a few withdrawals made soon after husband received the inheritances, said money was invested into certificates of deposit, money market accounts, and loaned with interest to the family business. Id. The interest, which the court qualified as marital property, was then commingled with the inherited property. Id. These commingled funds were then repeatedly invested to the extent that the trial court found that it was "impossible" to trace husband's inheritance and segregate the inheritance from the marital interest. Id. Therefore, the court held that the property was marital "relying, not solely upon commingling, but also upon the failure of [husband] to sustain his burden of tracing his separate funds." Id.
In light of the above findings, Missouri case law clearly establishes that a party must sustain an onerous and challenging burden in overcoming the afore-referenced statutory presumption. In essence, courts generally have held that a party is unable to successfully trace funds alleged to be separate, especially those that are placed in a joint bank account. Again, the foregoing cases demonstrate that commingling funds does not in and of itself create marital property however, the fact that parties go one step further and place it into a joint account is what "tips the scale" in most cases. Furthermore, these cases also suggest that once separate funds are transferred into a joint account, parties generally tend to commingle them with marital funds so that they are impossible to segregate by the time the parties decide to seek a divorce. Otherwise stated, the original property becomes so intertwined with marital funds that there is no clear way to trace back to its separate origin.
In light of the above law, what can you do to protect yourself from becoming like the husband inDrikow? Here are some key suggestions:
Keep your separate property separate. If you inherit money or have investment funds in your own name that were obtained prior to your marriage, put them into an account in your own name. Avoid mixing, - or commingling - the funds into an account with your spouse. While putting the money into a jointly held account does not necessarily transform it into marital property, the more you mix it with marital funds, the less able you will be above to overcome the presumption that it is marital property.
Keep records of all transactions regarding your separate funds. If you transfer money from your separate account to a jointly held account or give money from your separate accounts to your spouse, keep records of all of these transactions. This way, if you get divorced, the judge can see how you treated the funds, which can help demonstrate your intention to keep them separate.
Late is better than never. If you are seeking a divorce and did not follow the above procedures to separate your property, be sure to identify any statements that you may have made to others, including your investment representatives, bankers, etc., evincing your intent to keep the inheritance funds separate. In this view, it is highly recommended that you consult with an accountant and/or financial advisor in order to assist you in tracing your property back to its separate origin.
For further assistance in safeguarding your separate property, it is crucial that you speak with us today in order to learn more about Missouri law and how you can protect yourself in the wake of a divorce.