pre-marital debt liability

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Latest post 09-11-2009 4:49 PM by superman1. 9 replies.
  • 09-10-2009 12:44 PM

    • ebichu
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    pre-marital debt liability

    We are not seeking a divorce but we had a prenup which was my husband's idea, because he earns significantly more than I do and he has also purchased a house before we met.

    In the prenup, it specified what we each own before the marriage and what our premarital debts are. We both keep our personal bank accounts and investment accounts, and we would have a joint accout for all future income. All the future interests and earnings from the premarital investments belong to the original owner. As for the debt, the following statement is in the prenup - "Debts contracted by either party prior to the marriage shall remain a separate obligation of the party who contracted the same and neither the other party nor his or her property shall in any way be liable for payment thereof".

    From my understanding, I shouldn't responsible for his significant debt occurred before our marriage. We have agreed that mortgage is a special case as we both live there and he will add my name in the title eventually. So it will be paid out of our joint account. But I just found out that he was paying off the loan he had borrowed to purchase the engagement ring out of our joint account as well. The ring was listed as a gift to me before marriage, and listed as his premarital debt. Am I wrong that according to prenup, it should be paid out of his personal account? My husband told me that I had interprete the prenup statement in the wrong way - he thinks that although I'm not liable for it, it didn't preclude&n... his personal debt can not be paid out of the future community income.

    I also realized another problem regarding taxs on his earnings from his personal investment (which is usually quite a big amount each year). According to the prenup, all these earnings belong to him and will not be our community income. So how would we pay tax for it? I don't think it's fair that it should come out of our joint account. My husband told me he can't see a way of keeping track of all the tradings and know how much should be paid out of his pocket, so I will have to figure out a formular and tell him.

    It's depressing to talk about these, which is why I was opposed to having a prenup in the first place. But since he wanted to spell these out, I feel it's not fair to say "I keep what I have, but the tax and debts need to be paid out of our joint account".

  • 09-10-2009 1:05 PM In reply to

    Re: pre-marital debt liability

    "We have agreed that mortgage is a special case as we both live there and he will add my name in the title eventually"

    Is this specifically IN your prenup?

    And I would say your ring is HIS debt, not marital/joint as HE"S so concerned about keeping these things separate...yet manages to play by BOTH rules! 

    Are you earning an income that goes into the joint acct or is it just his?

  • 09-10-2009 1:11 PM In reply to

    Re: pre-marital debt liability

    The pre-nup has nothing to do with how money is spent during the marriage, only how it's divided AFTER the marriage.

  • 09-10-2009 1:13 PM In reply to

    Re: pre-marital debt liability

    ebichu:
    From my understanding, I shouldn't responsible for his significant debt occurred before our marriage.

    True.

    ebichu:
    We have agreed that mortgage is a special case as we both live there and he will add my name in the title eventually.

    "Eventually"?

    Promises, promises.

    Why not now?

    Delay is the deadlliest form of denial.

    ebichu:
    So it will be paid out of our joint account.

    Washington is a community property state. Paying the mortgage out of a joint account could make the house community property in spite of the pre-nup. That, of course, could be to your advantage in the event of divorce.

    ebichu:
    But I just found out that he was paying off the loan he had borrowed to purchase the engagement ring out of our joint account as well. The ring was listed as a gift to me before marriage, and listed as his premarital debt. Am I wrong that according to prenup, it should be paid out of his personal account?

    My interpretation of what you have written is that, yes, it should be paid out of his personal account.

    ebichu:
    My husband told me that I had interprete the prenup statement in the wrong way - he thinks that although I'm not liable for it, it didn't preclude&n... his personal debt can not be paid out of the future community income.

    Already fighting about finances. Good start.

    You are going to have to decide just how far you want to push something that might be insignificant in reality when compared to your marriage before it gets blown out of proportion and ends the marriage. On the other hand, if he gets away with this, who knows what he'll try in the future.

    ebichu:
    I also realized another problem regarding taxs on his earnings from his personal investment (which is usually quite a big amount each year). According to the prenup, all these earnings belong to him and will not be our community income.

    If he just keeps the earnings in the accounts, that's true. But if he uses those earnings to buy stuff that benefits both of you it could become community property as does whatever he buys.

    ebichu:
    So how would we pay tax for it?
    You could consider filing separately.
    ebichu:
    I don't think it's fair that it should come out of our joint account

    When did "fair" ever have anything to do with marriage?Ok

    ebichu:
    My husband told me he can't see a way of keeping track of all the tradings and know how much should be paid out of his pocket, so I will have to figure out a formular and tell him.

    That's right. You will.

    Seems like it's not important to him because he's got the lion's share of the assets and he'll nickel and dime you as long as you let him.

    ebichu:
    It's depressing to talk about these, which is why I was opposed to having a prenup in the first place. But since he wanted to spell these out, I feel it's not fair to say "I keep what I have, but the tax and debts need to be paid out of our joint account".

    There's another way of looking at this.

    You wrote that he earns significantly more than you do.

    Let's say, for example, that he earns 10,000 per month and you earn 5,000 per month. He puts 5,000 per month into the joint account and you put 2,500 per month into the joint account. That's 7,500. He writes a check for 500 for the ring, leaving 7,000 which is comprised of 2,250 of your money and 4,750 of his money. Whatever money you spend on yourself out of that account is like 1/3 your and 2/3 his anyway. So why make an issue out of it?

    You can extrapolate that out to the taxes, too.

    If you make 50,000 per year and he makes 100,000 per year and the taxes between the two of you are 30,000 from the joint account. That's 10,000 of your money and 20,000 of his money. Again, why make an issue of it?

    Seems to me that you are making a mountain out of a molehill.

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  • 09-10-2009 1:19 PM In reply to

    • ebichu
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    Re: pre-marital debt liability

    Thanks for your reply!

    The agreement is not stated in the prenup - it didn't say that I'm required to pay. It stated that we intend to add my name to the title, which doesn't entitle me to the equity that existed before the marriage. And "Unless otherwise agreed in writing between the parties any financial contributions by the wife toward the housing expenses shall not create a lien or property interest of the wife in the husband's separate property of the home". And for the future equity that would be split upon divorce, it's minus the part that's considered as his premarital property. We sort of verbally agreed that the mortgate payment should come out of the joint account in the future, because in washington law the house becomes community property after marriage and I'm entitled half of it. The prenup just spells out that I'm not entitled to half of what's before the marriage. I think it would be the right thing for me to do since I live there and share all the expenses.

    I AM frustrated because I feel he is trying to play by both rules.

    I do earn an income as well and all of it goes to the joint account.

  • 09-10-2009 1:21 PM In reply to

    • Drew
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    Re: pre-marital debt liability

    I agree as a layman the prenup only covers how to divide pot if marriage falls apart.

    I don't know how practical it would be to reconstruct the so called joint pot for his or your individual debts that were paid out of it. And I see your cosmetic point that in effect you are paying for own ring!

    Plus if we pay things such as income taxes out of joint pot defacto he gains as he very likely triggered far more taxes than you did.You in a sense may be underwriting his investments.

    Is your marriage already on rocks?

     

    Since prenup doesn't really cover current operation you might be wise not to rush to fund common pot until you can clear the fog on some money matters?



  • 09-10-2009 1:31 PM In reply to

    • ebichu
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    Re: pre-marital debt liability

    Marriage always seems so much better when people are not talking about money. No, it's not yet on rocks but it's not easy when there are issues.

    We have already started funding the common pot since the first month of marriage. And yes my point is why I should pay for my own engagement ring? I told him if he wants to pay for it out of the joint account it's fine for now. But if we ever divorce (hate to say that) he would have to back track and figure out how much he has paid out of the community pot. And he said he wouldn't do that so he might as well pay out of his own pocket from now on. Of course, I got loads of crap from him after he said that, blamed for not telling him in advance and now he has to deal with a potential late payment.

  • 09-11-2009 12:48 PM In reply to

    Re: pre-marital debt liability

    "We sort of verbally agreed that the mortgate payment should come out of the joint account in the future, because in washington law the house becomes community property after marriage and I'm entitled half of it. The prenup just spells out that I'm not entitled to half of what's before the marriage"

    Did you consult with your own attorney before signing a prenup?  I ask because this statement just reiterates basic community property law; most keep the investment made in the house before the marriage.   You didn't need a prenup to establish that.

    Frankly, I'd consult with my own attorney NOW if you didn't before; he IS trying to play by both rules so you can't really trust anything he says or asks you to sign.

    And nail down that "sort of verbally agreed" stuff; any deals regarding real estate MUST be in writing (statute of frauds).  Somehow I suspect he's got you all turned around.

  • 09-11-2009 1:21 PM In reply to

    • ebichu
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    Re: pre-marital debt liability

    Thanks kath21. We did both consult with our own attorney before signing the prenup. Mine told me that the prenup his attorney drafted was pretty close to WA state law. In my opinion, my husband didn't know what kind of "protection" he would get just from the state law, and having a prenup just made him feel more secure. And the prenup did list clearly what we both had before the marriage.

    He had already agreed not to make the payment for the ring out of our joint account. I'm not sure what he was thinking when he decided to do that...for the sake of our relationship, I don't intend to argue with him more on who's right and who's wrong on the interpretation of the clause. Guys don't like to admit their mistakes sometimes...at least not verbally. ;) 

  • 09-11-2009 4:49 PM In reply to

    Re: pre-marital debt liability

    You are already telling him if you ever divorce, he's going to have to pay back the community pot for the engagement ring?  Why don't you just tell him to pay for it himself from his own money right now?

    It sounds like you are being walked over in all of this.  I suggest you create your own document/spreadsheet, and spell everything out.  Once you complete, get your spouse to agree to it making compromises if needed.

    Maybe you should file taxes separately?

    It just sounds like what's happening here, is that he has most of the assets, and now he's going to have you paying for half of all the bills that are owed, some of which, could very well be taxes on investment money he cashes out. 

    Are you saying that if he makes $10,000 this year on his investment, and owes say $3000, you get to pay $1500 of that in tax?

    I don't think you can ever make all of this completely fair, but there has to be at least an overall feeling of fairness in order for this whole marriage to work out.  Otherwise, there is resentment.

     

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