How to keep pre-marital assets separate, while still contributing?

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tsglenn
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How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

Getting married in a few months and have significantly more assets than my spouse-to-be. We may or may not end up doing a prenuptial agreement (not what I'm here to ask about). If we do, it would just be to delineate pre-marital assets, as we are fine with our state's laws that any income or assets acquired after marriage are marital property and would be divided equitably in divorce.

So my question is, how do I clearly establish which assets are pre-marital (individual)?

I've read that as soon as you contribute, post-marriage, to an account that was previously an individual asset, it can become commingled and therefore a marital asset. But I've also read that in some cases, as long as the post-marriage contributions can be clearly delineated, pre-marital individual assets in the account can be maintained.

Ideally, all of our post-marriage paychecks and contributions would go to joint accounts, with no further contributions to any pre-marital individual accounts, keeping those clearly separated. However, there are some cases in which that is difficult, for example:

1. My employer 401k, which I would like to keep contributing to. If I switch which fund(s) I am contributing to as of the date of our marriage, is that sufficient to delineate pre/post marriage contributions?
2. Roth IRA: same situation as the 401k? I back-door contribute every year.
3. HSA: also same situation, slightly more complicated because it has a $1000 cash minimum balance requirement, above which excess funds are swept into an investment account. So a does this make it trickier to separate pre-marital assets by fund?
4. HYSA with a direct deposit requirement to get a high APR: this seems the most difficult, maybe impossible, to maintain as separate if I want to keep contributing.

I know 'consult an attorney' is the best answer and I plan to do so. Thanks for the advice anyway.
mancich
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Re: How to keep pre-marital assets separate, while still contributing?

Post by mancich »

Consult an attorney :D
Seriously, depending on your state's laws, I would think that simply keeping any accounts owned by you only, and not contributing to them after marriage, would be enough. I would make sure you save statements from both before and after the marriage to prove, if you ever need to, that this has been solely your account and nothing changed after marriage.
I am not an attorney
Ryzen
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Ryzen »

Are HSA and HYSA even significant enough to care? Those in particular seem like they would be extremely insignificant especially in the future as your other savings/investments grow more quickly. Also with the 401k and Roth - are you in your 20s and talking thousands/hundreds of thousands or are you 45 and we are talking over a million? I married young (and wouldn't have had this concern with protecting pre-marital assets anyways - otherwise why get married in the first place) and so marital assets would swamp pre-marital assets very shortly into the marriage and it wouldn't be a concern.

Hard to give advice when your post is so vague.

Here's the better question: what does your spouse think? Better be sure you are on the same page here.
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

Ryzen wrote: Mon Jul 26, 2021 11:10 am Are HSA and HYSA even significant enough to care? Those in particular seem like they would be extremely insignificant especially in the future as your other savings/investments grow more quickly. Also with the 401k and Roth - are you in your 20s and talking thousands/hundreds of thousands or are you 45 and we are talking over a million? I married young (and wouldn't have had this concern with protecting pre-marital assets anyways - otherwise why get married in the first place) and so marital assets would swamp pre-marital assets very shortly into the marriage and it wouldn't be a concern.

Hard to give advice when your post is so vague.

Here's the better question: what does your spouse think? Better be sure you are on the same page here.
401k: ~500k
Roth: ~85k
HYSA: ~95k (for a house down payment in next 1-2 years)
HSA: ~10k

So, you're probably right that the HSA is negligible. As for spouse's opinion, I'm not sure what you mean. She is okay with keeping pre-marital assets separate. I'm just trying to figure out logistically how to do it.
fortunefavored
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Re: How to keep pre-marital assets separate, while still contributing?

Post by fortunefavored »

Yeah, you need a lawyer. I don't think you can do the things you want to do (I simply froze all my taxable accounts and accepted my 401k would be absorbed.) You could (in theory) have as part of your marital agreement have them declaim a certain amount of assets.. but these things can be challenged in courts.

You also don't say how old you are or what your (or her) future income potential is vs. the assets.. honestly it may not be worth the hassle if you're going to save 10x as much in the next 10 years. $600K sounds like a lot now, but you'll probably laugh about it in 10 or 20 years.
absolute zero
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Re: How to keep pre-marital assets separate, while still contributing?

Post by absolute zero »

The more messy aspect isn't new contributions - it's the dividends/income on existing (pre-marital) funds. Maybe your state counts the dividends as separate/pre-marital property. Or maybe it considers those community property.

Seriously though, most advice is somewhat meaningless unless you specify the state that you live in, since this stuff varies so much state to state. And if you insist on researching this without consulting an attorney, I'd suggest avoiding Bogleheads as a resource altogether, as this forum tends to be a poor source of knowledge on this topic.
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Devil's Advocate
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Devil's Advocate »

If I am not willing to trust a new spouse with half my assets, not sure I would be getting married.

DA
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

fortunefavored wrote: Mon Jul 26, 2021 11:19 am Yeah, you need a lawyer. I don't think you can do the things you want to do (I simply froze all my taxable accounts and accepted my 401k would be absorbed.) You could (in theory) have as part of your marital agreement have them declaim a certain amount of assets.. but these things can be challenged in courts.

You also don't say how old you are or what your (or her) future income potential is vs. the assets.. honestly it may not be worth the hassle if you're going to save 10x as much in the next 10 years. $600K sounds like a lot now, but you'll probably laugh about it in 10 or 20 years.
We are 34 and 33; my income is much higher. The ~600k isn't everything, my total assets are about $1.5MM; I just highlighted the accounts that are harder to 'freeze' because I want to keep contributing to them. I consider that total amount to make up the majority of what I plan to save for retirement, since we plan to have kids and therefore have a lot higher expenses / lower savings for the next several years, and beyond that I don't see myself staying in my high income job for a lot longer. So, TL;DR, protecting these assets is pretty important to me.
fortunefavored
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Re: How to keep pre-marital assets separate, while still contributing?

Post by fortunefavored »

tsglenn wrote: Mon Jul 26, 2021 11:28 am
fortunefavored wrote: Mon Jul 26, 2021 11:19 am Yeah, you need a lawyer. I don't think you can do the things you want to do (I simply froze all my taxable accounts and accepted my 401k would be absorbed.) You could (in theory) have as part of your marital agreement have them declaim a certain amount of assets.. but these things can be challenged in courts.

You also don't say how old you are or what your (or her) future income potential is vs. the assets.. honestly it may not be worth the hassle if you're going to save 10x as much in the next 10 years. $600K sounds like a lot now, but you'll probably laugh about it in 10 or 20 years.
We are 34 and 33; my income is much higher. The ~600k isn't everything, my total assets are about $1.5MM; I just highlighted the accounts that are harder to 'freeze' because I want to keep contributing to them. I consider that total amount to make up the majority of what I plan to save for retirement, since we plan to have kids and therefore have a lot higher expenses / lower savings for the next several years, and beyond that I don't see myself staying in my high income job for a lot longer. So, TL;DR, protecting these assets is pretty important to me.
So freeze the rest of the 900K.. ignore the 600K.. you're "risking" $300K (half of $600K) worst case. I know.. $300K sounds like a lot.. but in the grand scheme of things it won't be. Especially once you have kids, and after 10 years of marriage you'll (generally) be on the hook for permanent spousal support, etc.

I am not a lawyer, but I was in your shoes 20 years ago, so I can look back and see how overly concerned I was. It's really only a concern for the first couple of years or so.. after that you're pretty much all-in anyways.
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TomatoTomahto
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Re: How to keep pre-marital assets separate, while still contributing?

Post by TomatoTomahto »

We simply did a rough individual NW at the time we entered the marriage. Every few years (we’ve been married approximately 3 decades), I update the spreadsheet out of curiosity. I was a SAHP (stay at home parent) for many of those years, giving up my career at that point but being the “supportive man behind the successful woman.”

ETA: I should mention that when we got married, our incomes were roughly equal.
I get the FI part but not the RE part of FIRE.
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vitaflo
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Re: How to keep pre-marital assets separate, while still contributing?

Post by vitaflo »

The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (if it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Last edited by vitaflo on Mon Jul 26, 2021 11:59 am, edited 1 time in total.
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

fortunefavored wrote: Mon Jul 26, 2021 11:40 am So freeze the rest of the 900K.. ignore the 600K.. you're "risking" $300K (half of $600K) worst case. I know.. $300K sounds like a lot.. but in the grand scheme of things it won't be. Especially once you have kids, and after 10 years of marriage you'll (generally) be on the hook for permanent spousal support, etc.

I am not a lawyer, but I was in your shoes 20 years ago, so I can look back and see how overly concerned I was. It's really only a concern for the first couple of years or so.. after that you're pretty much all-in anyways.
I think this is reasonable enough advice, thanks. However, at least regarding the 401k, I'm still curious what others have done in this situation. It must be common. What if we were getting married in our 40s with $1M or $2M in my 401k? If you want to keep contributing to it, is it possible to keep the pre-marital balance separate? I believe in my state, passive income (dividends and interest) from pre-marital assets stays individual, but not contributions.
rooms222
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Re: How to keep pre-marital assets separate, while still contributing?

Post by rooms222 »

Seriously though, most advice is somewhat meaningless unless you specify the state that you live in, since this stuff varies so much state to state.

Noting this for the third time in the thread. Most of this varies totally from state to state. Also, it is very different if your state is a community property state or not, as also noted above.
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Lee_WSP
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Lee_WSP »

If this is important to you, and it probably should be given your net worth, you need to see an attorney. Ideally one who has a good grasp of both family law and estate planning. But if you can choose only one specialty, family law would be the most relevant specialty.
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
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vitaflo
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Re: How to keep pre-marital assets separate, while still contributing?

Post by vitaflo »

tsglenn wrote: Mon Jul 26, 2021 12:02 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
By "handshake" I mean no prenup. You're missing that lawyers and judges also get a say in how assets can be divvy'd up. You're also missing that just because you may get to keep your pre-marital funds after a divorce that there are other ways for your ex-spouse to get at it (ie, alimony).

As such if this is a serious concern, you should go the legal route.
fortunefavored
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Re: How to keep pre-marital assets separate, while still contributing?

Post by fortunefavored »

tsglenn wrote: Mon Jul 26, 2021 12:02 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
Assuming this is true in your state, but again why you need to consult a lawyer. Because judges can (and do) make their own assessment of the capabilities of each spouse to support themselves. So let's say you had $5M in separate assets and $1M of shared assets. A judge might look at that and say "tsglenn obviously has lots of money so all $1M will go to the spouse" - maybe not that extreme, but it happens - especially when kids get into the mix.
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anon_investor
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Re: How to keep pre-marital assets separate, while still contributing?

Post by anon_investor »

tsglenn wrote: Mon Jul 26, 2021 12:02 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
#1 consult with a lawyer, you might want to get a pre-nup just in case anyway. It sounds like your sposue is not opposed to it. Just remember you may move to another state at some point in the future, so simply keeping your accounts separate may not be as effective as you think.

I am not sure the rules for your state and whether this will work, but what you can:
-Keep separate individual checkings/savings accounts, brokerage account
-Have each spouses' pay check deposited into their respective checking account from their contribute to their own brokerage accounts or IRAs. At least from an accounting standpoint it is clear the $ came from the spouse's job then to the individual's own investment accounts.
-Any money for shared expenses and be transfered from the individual bank accounts to a joint checking to pool.
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cchrissyy
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Re: How to keep pre-marital assets separate, while still contributing?

Post by cchrissyy »

the roth ira may be easiest to solve since you can open another one at another custodian and from now on only contribute to that one. i have no legal insight here it just seems like when you wrote the list you didn't consider that a person can have multiple iras as long as they aren't contributing to them beyond their individual annual limit.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by chazas »

Devil's Advocate wrote: Mon Jul 26, 2021 11:27 am If I am not willing to trust a new spouse with half my assets, not sure I would be getting married.

DA
Easy for you to say, apparently. Have you ever lost half your assets in an unexpected divorce? I have.

Agree with the advice of others to schedule an hour consult with a well-respected family lawyer in your area.
Last edited by chazas on Mon Jul 26, 2021 12:25 pm, edited 1 time in total.
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TomatoTomahto
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Re: How to keep pre-marital assets separate, while still contributing?

Post by TomatoTomahto »

vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (if it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
I will slightly disagree. Granted, my wife and I blended a family, but even absent that, there are circumstances where a couple can disagree about bequests. So, while we are not contemplating divorce and consider the assets “ours,” we want to leave bequests for “my” money and “hers.”
I get the FI part but not the RE part of FIRE.
123
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Re: How to keep pre-marital assets separate, while still contributing?

Post by 123 »

You also have to consider taxes. If you use community income (even if you're the only one working) to pay taxes on income from your separate assets (dividends, interest, capital gains) you could lose the separate assets distinction. Better to use income from those separate assets to pay any taxes that result. You would likely need to compute multiple pro-forma tax returns to derive the necessary numbers.

Perhaps you need to establish a separate entity as a trust to hold the taxable assets and have that entity pay the taxes on those (but trust tax rates are higher).

Depending on the mechanics of how your 401k allows investment allocation (past versus future) a separate timeline allocation might work. However, you could never do another reallocation of past investments without corrupting the segregation. Best advice would be to keep each and every 401k statement and transaction record to document the segregation maintenance.

Of course spend some time with a divorce attorney to review your plan and strategy ahead of the marriage.

And put off the marriage for at least a year so you can consider the consequences further. And as mentioned by another poster when children enter the picture the entire situation changes. Nothing you say or do now can limit the rights of the children.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by mptfan »

Devil's Advocate wrote: Mon Jul 26, 2021 11:27 am If I am not willing to trust a new spouse with half my assets, not sure I would be getting married.
I don't think that's a fair comment, especially not for people coming into the marriage with significant assets.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by mptfan »

anon_investor wrote: Mon Jul 26, 2021 12:16 pmJust remember you may move to another state at some point in the future, so simply keeping your accounts separate may not be as effective as you think.
The OP does not have to move to another state, the OP's spouse could move to another state and file a divorce in the other state.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by neverpanic »

tsglenn wrote: Mon Jul 26, 2021 12:02 pm may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
After 10 years of marriage, during which you will have acquired more assets/debt, how do you intend to establish there has been no commingling, given your ongoing active participation in management of and contributions to the pre-existing accounts?
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

neverpanic wrote: Mon Jul 26, 2021 12:49 pm
tsglenn wrote: Mon Jul 26, 2021 12:02 pm may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
After 10 years of marriage, during which you will have acquired more assets/debt, how do you intend to establish there has been no commingling, given your ongoing active participation in management of and contributions to the pre-existing accounts?
I don't know, you tell me :D In all seriousness, that was the original question in my post.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Marseille07 »

tsglenn wrote: Mon Jul 26, 2021 12:53 pm
neverpanic wrote: Mon Jul 26, 2021 12:49 pm
tsglenn wrote: Mon Jul 26, 2021 12:02 pm may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
After 10 years of marriage, during which you will have acquired more assets/debt, how do you intend to establish there has been no commingling, given your ongoing active participation in management of and contributions to the pre-existing accounts?
I don't know, you tell me :D In all seriousness, that was the original question in my post.
I don't think you can without a prenup. I mean, if your spouse is *reasonable* then anything agreed to takes place. But often, people just go after 50/50 because that's the law.
Last edited by Marseille07 on Mon Jul 26, 2021 1:03 pm, edited 1 time in total.
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tsglenn
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Re: How to keep pre-marital assets separate, while still contributing?

Post by tsglenn »

123 wrote: Mon Jul 26, 2021 12:26 pm You also have to consider taxes. If you use community income (even if you're the only one working) to pay taxes on income from your separate assets (dividends, interest, capital gains) you could lose the separate assets distinction. Better to use income from those separate assets to pay any taxes that result. You would likely need to compute multiple pro-forma tax returns to derive the necessary numbers.

Perhaps you need to establish a separate entity as a trust to hold the taxable assets and have that entity pay the taxes on those (but trust tax rates are higher).

Depending on the mechanics of how your 401k allows investment allocation (past versus future) a separate timeline allocation might work. However, you could never do another reallocation of past investments without corrupting the segregation. Best advice would be to keep each and every 401k statement and transaction record to document the segregation maintenance.

Of course spend some time with a divorce attorney to review your plan and strategy ahead of the marriage.

And put off the marriage for at least a year so you can consider the consequences further. And as mentioned by another poster when children enter the picture the entire situation changes. Nothing you say or do now can limit the rights of the children.
Well this seems to complicate things significantly. I have a taxable brokerage account that I can easily freeze (i.e. stop contributing to), but tracking which income goes to pay taxes from that account seems beyond feasible.
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JoeRetire
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Re: How to keep pre-marital assets separate, while still contributing?

Post by JoeRetire »

tsglenn wrote: Mon Jul 26, 2021 11:04 am So my question is, how do I clearly establish which assets are pre-marital (individual)?
Three accounts:
- spouse 1
- spouse 2
- ours
I know 'consult an attorney' is the best answer and I plan to do so.
Do so.
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delamer
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Re: How to keep pre-marital assets separate, while still contributing?

Post by delamer »

fortunefavored wrote: Mon Jul 26, 2021 12:13 pm
tsglenn wrote: Mon Jul 26, 2021 12:02 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
Assuming this is true in your state, but again why you need to consult a lawyer. Because judges can (and do) make their own assessment of the capabilities of each spouse to support themselves. So let's say you had $5M in separate assets and $1M of shared assets. A judge might look at that and say "tsglenn obviously has lots of money so all $1M will go to the spouse" - maybe not that extreme, but it happens - especially when kids get into the mix.
This is my understanding too.

The size of pre-marital/separate assets can affect how the jointly-owned assets are split. So even though a spouse A might not be awarded a portion of spouse B’s separate assets, the joint assets might not be split evenly either.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
absolute zero
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Re: How to keep pre-marital assets separate, while still contributing?

Post by absolute zero »

delamer wrote: Mon Jul 26, 2021 1:28 pm
fortunefavored wrote: Mon Jul 26, 2021 12:13 pm
tsglenn wrote: Mon Jul 26, 2021 12:02 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (when it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
Thanks and I agree, but I'm not sure what you mean by "handshake agreement." We may get a prenup, but even without one, my understanding is that in our state, pre-existing individual assets, as long as they are not commingled after the marriage, would not be subject to division in a divorce. So it's not up to us, it's our state law. Unless I'm missing something here. We are not in a community property state.
Assuming this is true in your state, but again why you need to consult a lawyer. Because judges can (and do) make their own assessment of the capabilities of each spouse to support themselves. So let's say you had $5M in separate assets and $1M of shared assets. A judge might look at that and say "tsglenn obviously has lots of money so all $1M will go to the spouse" - maybe not that extreme, but it happens - especially when kids get into the mix.
This is my understanding too.

The size of pre-marital/separate assets can affect how the jointly-owned assets are split. So even though a spouse A might not be awarded a portion of spouse B’s separate assets, the joint assets might not be split evenly either.
I don’t know how common this is, but it’s how things work in my state. Community assets are not split 50/50; they are split according to what is deemed “just and right.” There are over a dozen factors that are weighed when making this (seemingly arbitrary) decision, and the size of each party’s separate estate is most definitely a factor that is considered.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by delamer »

TomatoTomahto wrote: Mon Jul 26, 2021 12:25 pm
vitaflo wrote: Mon Jul 26, 2021 11:57 am The only time this would matter is in the event of a divorce. But divorces can be incredibly messy. While you may assume good faith and a handshake is adequate now, if you actually go through divorce it won't be. I have too many friends who thought their divorce would end amicably but it was anything but. When lawyers get involved, all bets are off.

You are preparing for the future during the best part of your relationship. You should be preparing for what a potential future will look like during the absolute worst part of your relationship (if it ends). If you're going to have legal representation during a divorce (which you will), you need it now too if this money separation concerns you.
I will slightly disagree. Granted, my wife and I blended a family, but even absent that, there are circumstances where a couple can disagree about bequests. So, while we are not contemplating divorce and consider the assets “ours,” we want to leave bequests for “my” money and “hers.”
I also will disagree slightly.

One of the main reasons that I kept my inheritance in an account in my name only is because my husband and I disagreed on bequests.

Should my husband and I die at the same time, the secondary beneficiaries on our joint assets are my husband’s extended family. I’m OK with that, but not with having my inheritance from my parents going to my husband’s family. That will go to charities.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: How to keep pre-marital assets separate, while still contributing?

Post by SteadyOne »

My understanding of this is that if you add even one cent into your ‘own’ account after the marriage date, the whole account will become commingled and can be claimed to be joined. The only way to keep it separate in some legal way is not to contribute anything and not to do anything with it
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almostretired1965
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Re: How to keep pre-marital assets separate, while still contributing?

Post by almostretired1965 »

So it seems to me the existing Roth IRA should not be a problem. Just open a new account for future contributions post marriage.

As for the 401K, you can always get a new job!

A
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Marseille07 »

almostretired1965 wrote: Mon Jul 26, 2021 1:52 pm So it seems to me the existing Roth IRA should not be a problem. Just open a new account for future contributions post marriage.

As for the 401K, you can always get a new job!

A
If the whole 401K gets commingled, not just the new contributions, then getting a new job certainly comes into the picture. Although I wonder if prenups can specify something to keep it separate?
Last edited by Marseille07 on Mon Jul 26, 2021 2:07 pm, edited 1 time in total.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Grt2bOutdoors »

You are planning on having kids? Go see an attorney. In the event of a divorce, the courts will be looking to see there is support for the child - you think your assets are off limits? :) Good luck with that......
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Luckywon »

absolute zero wrote: Mon Jul 26, 2021 11:21 am
if you insist on researching this without consulting an attorney, I'd suggest avoiding Bogleheads as a resource altogether, as this forum tends to be a poor source of knowledge on this topic.
We executed a prenuptial agreement before getting married and spoke to several attorneys in the process. Unfortunately, I can confirm the above is true. Even if you can stomach people stating there is something wrong with your relationship or marriage for considering these issues, these threads are too filled with people misrepresenting as fact their frequently incorrect theories about prenups and divorce law to be useful.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by anon_investor »

SteadyOne wrote: Mon Jul 26, 2021 1:47 pm My understanding of this is that if you add even one cent into your ‘own’ account after the marriage date, the whole account will become commingled and can be claimed to be joined. The only way to keep it separate in some legal way is not to contribute anything and not to do anything with it
I think it would depend on the state.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Matahari »

OP, at a minimum, you need to:

(1) Understand your state's law regarding treatment of premarital (separate) and marital assets and treatment of income derived from premarital assets. Whether your state is a community property state is key. Generally, in community property states, all income earned during marriage is presumed to be community property, including income earned on separate property.

(2) Concentrate on minimizing potential "splitting" problems by isolating your (both your and your prospective spouse') premarital assets and and your and your spouse's ability to "track" your premarital assets over time. If you have premarital retirement accounts that you can roll over into an individual IRA or Roth IRA, then do so. Otherwise, at a minimum, a snapshot of what you owned as of time of marriage is important.

(3) As for your funds that you intend to use as a down payment, I asked the forum for suggestions on how to treat that on behalf of my niece. See this thread: viewtopic.php?f=2&t=349582
However, I do not intend to discuss that topic any further here.

Best wishes for your marriage.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by CAsage »

Where you can open a separate or new account (e.g. Roth, IRA, brokerage, cash) you should do so, and consider having all that at Brokerage A. Then open new "happily married" accounts at Brokerage B (you can use the same brokerage, with different accounts, but separation is all about degrees). For things that you can't "move" like an employee 401k account, take a snapshot near the wedding of your account shares to show "before". I don't think this would account for dividend shares but it's something. If you hypothetically own real estate, get an approximate (e.g. zillow) appraisal and a mortgage statement. Archive it all. If you want to keep it as identified separate property, then you cannot add to it with any earned income, or transfer any of the separate property to a new account or it's considered "commingled". In California, earnings of separate property ARE still separate. A review of how divorce treats marital property in your state would undoubtedly give you good tips! A prenup is recommended if you can, but one can maintain separate property in other ways. I'm not a lawyer, I don't play one on TV, but all my friends and most of my family are divorced, and this time I got a prenup. And separate property kept that way! And yes, you should see a lawyer for what really works in your state; these are just suggestions.
Last edited by CAsage on Mon Jul 26, 2021 4:12 pm, edited 1 time in total.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by 123 »

anon_investor wrote: Mon Jul 26, 2021 2:39 pm
SteadyOne wrote: Mon Jul 26, 2021 1:47 pm My understanding of this is that if you add even one cent into your ‘own’ account after the marriage date, the whole account will become commingled and can be claimed to be joined. The only way to keep it separate in some legal way is not to contribute anything and not to do anything with it
I think it would depend on the state.
+1 And the expertise and ruthlessness of the attorneys involved.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by anon_investor »

123 wrote: Mon Jul 26, 2021 3:53 pm
anon_investor wrote: Mon Jul 26, 2021 2:39 pm
SteadyOne wrote: Mon Jul 26, 2021 1:47 pm My understanding of this is that if you add even one cent into your ‘own’ account after the marriage date, the whole account will become commingled and can be claimed to be joined. The only way to keep it separate in some legal way is not to contribute anything and not to do anything with it
I think it would depend on the state.
+1 And the expertise and ruthlessness of the attorneys involved.
Get the advice of a competent AND experienced attorney. There are plenty of experienced attorneys that are not competent...
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Re: How to keep pre-marital assets separate, while still contributing?

Post by CAsage »

If you (really) want to put a chunk of "your" money into a house for a down payment, then mathematically it could look like the % of the down payment would be "yours" and the mortgage balance would be "shared". One way to do this would be to simply (and here be dragons) title the property something like "John Only 20%" and 80% "John &Jane Joint tenants". Specifying a percentage of ownership preserves the appreciation on that chunk, while the balance belongs to the couple. Some spouses dislike this. At least you have some ideas from all these responses on things to talk to your lawyer or future spouse about.....
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by 123 »

CAsage wrote: Mon Jul 26, 2021 4:00 pm If you (really) want to put a chunk of "your" money into a house for a down payment, then mathematically it could look like the % of the down payment would be "yours" and the mortgage balance would be "shared". One way to do this would be to simply (and here be dragons) title the property something like "John Only 20%" and 80% "John &Jane Joint tenants". Specifying a percentage of ownership preserves the appreciation on that chunk, while the balance belongs to the couple. Some spouses dislike this. At least you have some ideas from all these responses on things to talk to your lawyer or future spouse about.....
+1 Excellent suggestion. In many marriages, particularly the early years, the equity in the family home is the largest single asset.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by JediMisty »

CAsage wrote: Mon Jul 26, 2021 4:00 pm If you (really) want to put a chunk of "your" money into a house for a down payment, then mathematically it could look like the % of the down payment would be "yours" and the mortgage balance would be "shared". One way to do this would be to simply (and here be dragons) title the property something like "John Only 20%" and 80% "John &Jane Joint tenants". Specifying a percentage of ownership preserves the appreciation on that chunk, while the balance belongs to the couple. Some spouses dislike this. At least you have some ideas from all these responses on things to talk to your lawyer or future spouse about.....
In NJ, the only source of our down payment for our marital home was my funds from before the marriage. As my former husband is uncommonly ethical, we subtracted those funds (without regard to appreciation) from the total before we split the proceeds when we sold just before we finalized our divorce. Around the same time, a friend had ALSO comingled his cash by also using his funds for the deposit for his marital home. He also relied on the integrity of his spouse. Well, his spouse sought the entire one half of the proceeds of the sale and was successful. Get the advice of an attorney in your state and then follow the advice We both ignored our attorneys advice. It worked out ok for me, but not my friend......
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Re: How to keep pre-marital assets separate, while still contributing?

Post by FireflyGlow »

Luckywon wrote: Mon Jul 26, 2021 2:34 pm
absolute zero wrote: Mon Jul 26, 2021 11:21 am
if you insist on researching this without consulting an attorney, I'd suggest avoiding Bogleheads as a resource altogether, as this forum tends to be a poor source of knowledge on this topic.
We executed a prenuptial agreement before getting married and spoke to several attorneys in the process. Unfortunately, I can confirm the above is true. Even if you can stomach people stating there is something wrong with your relationship or marriage for considering these issues, these threads are too filled with people misrepresenting as fact their frequently incorrect theories about prenups and divorce law to be useful.
+2. The legal landscape in matters of divorce and family is highly state-specific. We don't know where OP is, so we don't know whether he is in a community property or marital property state, the jurisdiction's particular jurisprudence on pre-nuptial agreements, etc. Having reviewed the OP's concerns, if he were in my state, he would need a prenuptial agreement that identifies each of his pre-marital accounts and also include the proviso that the funds in those accounts remain his separate property, regardless of contributions or appreciation during the marriage. This is typically viewed to be valid, in my state. The same would be true for prospective spouse. Of course, that does not solve the potential alimony issue in a potential divorce created by the parties' disparate earning capabilities. In most states, child support cannot be waived or included in a pre-nuptial agreement. (Also, I am an attorney, and I have been divorced.)
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Re: How to keep pre-marital assets separate, while still contributing?

Post by UpperNwGuy »

You need to be putting these questions to a lawyer from your state, not to a bunch of strangers on the internet.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Devil's Advocate »

UpperNwGuy wrote: Tue Jul 27, 2021 6:42 pm You need to be putting these questions to a lawyer from your state, not to a bunch of strangers on the internet.
I don't think this is fair. This statement could be made for nearly every post on here. While I agree that in this instance a professional opinion is warranted, opinions from strangers on the internet is another source of information. You do get what you pay for tho.

DA
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Re: How to keep pre-marital assets separate, while still contributing?

Post by rooms222 »

Devil's Advocate wrote: Tue Jul 27, 2021 7:03 pm
UpperNwGuy wrote: Tue Jul 27, 2021 6:42 pm You need to be putting these questions to a lawyer from your state, not to a bunch of strangers on the internet.
I don't think this is fair. This statement could be made for nearly every post on here. While I agree that in this instance a professional opinion is warranted, opinions from strangers on the internet is another source of information. You do get what you pay for tho.

DA
Some of this reaction was I think because the OP was given several hints and direct statements to identify the state, and did not do so. Insurance and family law related questions have a large financial component, but are also extremely state-specific. In a different forum for such questions, it is mandated in the post to list state in the initial posting. It is not required here, but it limits the responses, if you don't do so. The posters have given almost all the advice they can without the state being given.
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Re: How to keep pre-marital assets separate, while still contributing?

Post by Lee_WSP »

Devil's Advocate wrote: Tue Jul 27, 2021 7:03 pm
UpperNwGuy wrote: Tue Jul 27, 2021 6:42 pm You need to be putting these questions to a lawyer from your state, not to a bunch of strangers on the internet.
I don't think this is fair. This statement could be made for nearly every post on here. While I agree that in this instance a professional opinion is warranted, opinions from strangers on the internet is another source of information. You do get what you pay for tho.

DA
Bogleheads as a forum generally does a better job actually researching issues, such as relevant statutes, but it’s no alternative to actual legal research. Unlike taxes, the answer is not usually in the code or the regulations thereof.
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