The Difference Between Marital Property in a Divorce and Joint Property in an Estate

Posted by Martin Heller Potempa & Sheppard, PLLC on August 17, 2021

Many people, including some attorneys, think the concept of marital property and joint property is the same in both a divorce and an estate. This is not correct. Sometimes, property can be both marital for a divorce and joint for an estate. But just because the property is considered marital in a divorce does not automatically mean that it is joint in an estate. And the other way around is also true.

Marital Assets vs. Estate Assets

Marital assets are assets that are divided when a couple divorces. One of the main issues in determining marital property is how the assets were acquired. If an asset was acquired during the marriage with marital funds, it will be considered a marital asset. In this case, it does not matter in whose name the asset is titled. Even if the asset is only titled in the wife’s name, the asset will be considered marital for division in a divorce.

Estate assets pass when a person dies as part of their estate. The main, and really only, issue is how the item is titled. If an asset was acquired with marital funds, it will still be part of the owner’s estate at his/her death. Continuing the above example, if marital funds are used to acquire an asset titled in the wife’s name, then the wife’s estate documents control how it passes. The wife’s estate document may not direct the asset to the husband, so he does not automatically receive the asset from the wife’s estate. Instead, she may leave it to the children or other people. And the husband’s documents have no authority to direct where it goes at the wife’s death.

Tenants by the Entirety

Estates have the concept of joint ownership with a right of survivorship. When a husband and wife own something together, regardless of where the acquisition funds come from, it is deemed to have a right of survivorship from one spouse to the other. This form of ownership is called Tenants by the Entirety.

Because Tenants by the Entirety results with the surviving spouse receiving the jointly owned asset after the first dies, it is often confused with marital property. Below are some variations and the result that can happen:

  • 1. Wife starts a business using marital funds:
    • Divorce: Business is a marital asset for division in a divorce.
    • Estate: Wife’s will determines who gets her interest in the business. It does not have to go to the husband.
  • 2. Wife uses her separate funds (funds she had before the marriage and kept separate) to start the business:
    • Divorce: Because Wife started the business with separate funds, the business will be a separate asset for the divorce. (Note, there are still several ways the business, or a portion of the business, could be considered marital for division.)
    • Estate: Wife’s will determines who gets her interest in the business. It does not have to go to the husband.
  • 3. Husband and Wife use marital funds to buy a piece of real property and title it in both their names as Tenants by the Entireties:
    • Divorce: Because the property was purchased with marital funds, the property will be a marital property subject to division at divorce.
    • Estate: Because the property is titled in both Husband’s and Wife’s name as Tenants by the Entireties, at the first death, the property will be owned 100% by the survivor of them.
  • 4. Wife uses her separate funds to buy real property, putting Husband’s name on the deed as Tenants by the Entireties:
    • Divorce: Because Wife put Husband’s name on the deed, she created a marital asset. In essence, she converted what would have been a separate asset into a marital asset by adding Husband’s name on the deed.
    • Estate: Because the property is titled in both Husband’s and Wife’s name as Tenants by the Entireties, at the first death, the property will be owned 100% by the survivor of them. The fact that Wife used her separate money to purchase the property has no bearing on how it passes on death. The titling of the property controls.

Know Where Your Assets Will Go

You want to plan for whatever the future may hold, even if you don’t know what it is right now. At Martin Heller Potempa & Sheppard, PLLC, we can help ensure that you know what will happen to your assets in the event of a divorce or who you want to receive them after you pass.

Contact our estate planning lawyers in Tennessee today to learn more.

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