Division of Premarital Assets:

Placing Your Spouse's Name on Property You Owned Prior to Marriage

Property that you own prior to marriage, remains non-marital property, and is not subject to equitable distribution upon a divorce. In simpler terms, you owned it before marriage, you will continue to own it after marriage and your spouse will have no interest in the property.

However, it is a frequent occurrence that after marriage, a spouse, say the wife, will put her husband's name on the title to property that the wife owned prior to marriage. She will do so with good intentions and think nothing of the legal consequences if the parties ever get a divorce. And unfortunately (or fortunately, depending on which side of the issue you are on) there are indeed major legal repercussions to this act. There are also subtle and very important differences that occur depending on how you structure the transfer of title. The first example that follows is the general rule. You owned property in your name before marriage, you got married, and you transferred title from your name into the name of yourself and your spouse jointly, or solely into your spouse's name. The second example is a twist on the general case to demonstrate how subtle differences can have large consequences. To say the least this is a complex area, and I don't expect even most attorneys to truly understand it, but it is helpful to get the gist of the idea so that you have an idea of what to speak about to your attorney about this issue.

In general, no matter your intent, unless there is strong evidence that placing your spouse's name on the title to property was not meant as a gift, under Georgia law, your placing your spouse's name on property you owned before marriage will be seen as gifting him or her the property. What this means is not that you will lose all interest that you have in the property, but that you have voluntarily given away your non-marital or pre-marital interest in the property. That is, the property is treated as if it was acquired during the marriage, with only marital funds, and your non-marital interest vanishes into thin air.

It works like this: Say husband owns a house prior to marriage that has $200,000 of equity in it. Husband marries wife, and a few years into the marriage, husband puts wife on the title to the home so that they own the home jointly (usually done by transferring title from Husband to Husband and Wife jointly). Then a few years later the parties get a divorce. What is the effect of putting the wife's name on the title in this manner:

If husband had not put his wife's name on the title, at the divorce, the $200,000 of equity would remain his pre-marital property and the wife would not be entitled to any of the $200,000 that Husband owned pre-maritally, nor would she be entitled to any credit given for any appreciation that may accrue over the years for this portion of the property. The amount of appreciation may be substantial. The Husband, off the top, would therefore get to keep the $200,000 he brought into the marriage, plus whatever appreciation accrued to this portion of the property over the years.
However, since husband put wife's name on the title as a joint owner of the property, absent strong evidence to the contrary, the court will treat the house as if the husband gifted his non-marital interest on the house to her, and the wife will be entitled to an equitable interest, probably 50% of the house, including her share in any appreciation in value on the property.

USING A REAL WORLD EXAMPLE: Lets say at the time of marriage the House was worth $300,000 and there was a $100,000 mortgage on the property (ie, $200,000 in pre-marital equity). 10 years later, at the time of divorce, the house is now worth $400,000 and the mortgage has been paid off.

If Husband put his Wife's name on the title then any argument of him having a pre-marital interest is out the window unless there is substantial evidence that doing so was not intended as a gift and the parties will likely split the equity in the home 50/50 which means each would get $200,000 from the home.
However, Husband never put Wife's name on the property, and kept the property in his name, then there is as follows

$200,000 in pre-marital equity,
$100,000 in marital equity (the amount the mortgage was paid down during the marriage);
$100,000 in increased value on the home since the date of the marriage.

Using these numbers, if Husband had never put Wife's name on the title to the property Husband would most likely get the following:

$200,000 pre-marital interest, plus,
$50,000 (or 50% of the marital equity from the mortgage paydown), plus,
$67,000, which is 2/3rds of the $100,000 appreciation on the property that occurred during the marriage.
This totals $317,000 for Husband and $83,000 for Wife at the end of the divorce. Quite the substantial difference.

The long and short of it is that nice and loving gestures like this may have some real and great financial consequences if you ever divorce your spouse. If you do not intend a gift, if you intend a transfer to protect the home from creditors, or for some other reason, but do not intend to gift away your pre-marital interest, then call your attorney so that you can structure such a transfer correctly.

There are many different scenarios involved in placing your spouse's name on property that will vary from case to case. Even a little difference in how the transaction is structure can make a large difference. As for example, if instead of putting your spouse's name jointly on the title as in the above example, you instead buy a home jointly with your spouse, and do so by using your pre-marital money as the down payment. Does buying the home in joint names in this manner abrogate your pre-marital interest to the down payment money and any appreciation to the downpayment money?

A real world example, you have $125,000 of stock that you inherited. You cash out that stock, pay the taxes on it, and have $100,000 left over. You use this $100,000 as down payment on a home that you and your spouse buy jointly. Your spouse puts $0 down on the home. A few year's later you get a divorce from your spouse, and during the divorce your spouse claims that you put his or her name on the title to the property, you therefore no longer have a pre-marital interest to this $100,000 because, like in the above example, you gifted your pre-marital interest to the property. Ouch! So is your spouse correct in this argument? That issue is undecided under Georgia law, but I will tell you, at the trial court level I have argued, and won on the issue, that the non-marital interest is still non-marital, and the spouse was able to keep their $100,000 down payment plus their interest in the appreciation on the house. That may not be the case in every case however as the Georgia Supreme Court has not ruled on the issue. But the key issue here is the difference that in the first example above you actually TRANSFERRED title to your spouse, but in the second interest you TRANSFERRED nothing to your spouse, as you bought the property at the same time. It is a subtle difference, but this difference can make a very large difference.

This sort of issues arises not just from homes and real property, but can exist for any type of property in which you may place your spouse's name on.

These sort of issues are very complex but it is very important to be able to identify these issues and be able to argue this issues as there is often a lot of money at stake in these issues. If you have any questions about an issue like this, please don't hesitate to give us a call. This area is complex and I would enjoy speaking with you about it.