What Happens To The Estate When A Couple Is Divorced?

Dealing with a breakup after many years can be a terrifying experience — especially when dissolving a marriage is in the cards. Everyone thinks they know what to expect. Marital assets will be reallocated. One spouse or the other will probably obtain partial or full custody of the children. Alimony and child support might be in play. But what happens when a divorce contradicts binding legal documents? 

For example, let’s say the family owns a big estate. One spouse married into that estate, while the other was born into it and received the asset through inheritance. Long ago, both spouses visited an estate planning attorney to sort out their affairs in case the worst happened. It went way beyond the drafting of a simple will. There are beneficiaries on both sides of the family. There are trusts and mutual funds set up for those beneficiaries, funded both by the estate and the parents of the spouse who married into the estate. 

How does all that get sorted out during a messy divorce?

Well, one thing you should know right away is that there are several factors that determine how long-winded a divorce will be. One is how long the couple has been together. Another is how much the couple owns — and how many of those assets fall inside the legal framework of “marital assets.”

You probably have a number of questions already. Not sure what to expect from your impending divorce? You can visit our legal website to have all those questions answered. But you also might learn that you don’t already have the answers you think you do.

Here are a few things that might surprise you. Did you know that not all property will necessarily be divided when the divorce comes through? Marital assets are divided. But property is a different beast altogether. It also depends on where you live. For example, the state of California divides property equally. Each divorcing spouse receives half after a judge determines the total value of the property. In New Jersey though, equitable distribution laws apply. That means each spouse will receive what makes the most sense based on private circumstances. That can leave a wealthy partner with relatively little, and a poor partner with a lot more than expected.

Inheritance is also governed by state law. Usually, inheritance is not considered marital property — which means the spouse with the inheritance is entitled to keep what was received. When the vast majority of an inheritance was property received as part of an estate, that might result in an overall inequitable distribution of assets — which is why a judge might give the other partner the vast majority of all other assets. Fair is fair.

There’s another legal snafu called “transmutation of property” that could result in a person’s inheritance forever after being considered marital property. For example, let’s say a spouse inherits a home. The other spouse signs the deed. Both spouses move into the house and pay the bills together. More than likely, a judge will consider the home marital property.