| 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.
For more information on the various forms of ownership, see the chapters
in this book on home ownership and buying and selling a home.
Debts and Taxes
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 Ámarried 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.
Doing Business Together
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.
See the section on bankruptcy.
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 chapter
on "The
Rights of Older Americans."
Domestic Violence
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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