If you're about to get married -- not divorced, but married -- and you live in a community-property state, brush up on your record-keeping skills now, and find out how you and your spouse would handle debt taken on or paid off during the marriage. If you don't do either of these things, you could find yourself out by quite a bit of money should you and your spouse get divorced. At stake is something called estate reimbursement, and it can fill or drain your bank account depending on the records you've kept.
Community Debt
When you and another person get married, you bring more than your money and property to the marriage -- you bring estates. Your money and property is your estate, your spouse's money and property are his or her estate, and the money and property you earn and buy together are the community estate.
This concept of community money includes debt. Debts incurred during the marriage are considered community debts, and that can impact a divorce settlement and what you might be responsible for after the divorce. That's right: if your spouse racks up a lot of debt, and then you get divorced, you might be on the hook for some of it depending on the laws of the state that you live in.
Paying off debt quickly and remaining as debt-free as possible seem like the best solutions, and there's a lot to be said for this strategy, of course. But paying off debt can leave one of you smarting, feeling like you've paid much more than you should have, if the marriage goes sour. For example, if your spouse uses credit cards to finance a small business venture, and you end up paying off a lot of that debt using your own savings that you had from before the marriage, you could feel like you've been cheated if your spouse divorces you soon after.
But if you keep records showing that you paid off the debt using your pre-marriage funds, or funds that were in your own estate, you might be able to get the funds reimbursed as part of the divorce settlement. That can affect how much alimony you pay or how much money you have to pay up front as part of the divorce settlement.
Tables Turned
If you're the one taking on debt and your spouse pays, records can also help protect you. You have to show that your spouse has benefited from the debt you took out -- maybe the business venture actually succeeded for a while and improved the quality of life for both of you, for example. Or, maybe you paid off more of the mortgage of the house you and your spouse lived in, thus evening out the amount of money both of you paid to benefit the other spouse.
Keeping records like that, and then using them in a divorce settlement, can be difficult. This is where having a good divorce attorney comes in. He or she can go over the records of expenses and debt with you to help determine what you might really be entitled to in terms of reimbursement.
Estate reimbursement and community debt can be confusing subjects, and you shouldn't try to tackle them alone in a DIY divorce. Contact a good divorce attorney today if you find yourself facing divorce. This ensures you get the best advice possible for maneuvering through a tricky legal situation.
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