Today I held a workshop on copyright, trademark and contract laws with the Entrepreneurship Program of Youth Employment Services. We had an interesting discussion about how to protect your assets by entering a marriage contract.
Typically, the (legally married) spouses, at the breakdown of the marriage are entitled to what is called “equalization.” This means, the spouse with less net worth is entitled to 50% of the difference between wealth of the spouses’.
One way to shield your assets from this process is to enter into a domestic agreement. However, not everything can be shielded, or excluded, from the equalization process.
Perhaps the most notable item that cannot be excluded from the equalization process is the matrimonial home.
This exclusion has important consequences. It means any money that goes into the matrimonial home is subject to equalization, regardless of the agreement of the spouses, and whether the money in question is otherwise entitled to be excluded from equalization.
For instance, certain insurance proceeds are excluded from the equalization process by the statute. However, if you use the insurance proceeds to pay down the mortgage of the matrimonial home, you will not be able to exclude the amount later when the marriage breaks down.
Sadly, when most people get wind-fall money, such as insurance proceeds, they usually pay down the mortgage of the matrimonial home (unless things have gone sour enough). Once the wind-fall money is paid into the matrimonial home, it is then automatically subject to equalization.
Until next time, try to keep your spouse’s hands off…
