Need for Antenuptial Agreements

A. Distinction Between Separate Property and Marital Property

To understand what makes an antenuptial agreement useful, you must first understand the distinction between marital and separate property.

1. Separate Property

When two people get engaged, they each own separate property. For instance, before marriage, Harry owns a motorcycle and 100 shares of Walt Disney stock at $30.00 per share. Wilma owns a home at 123 East Main Street and a 1965 Ford Mustang sitting in a barn with no engine. These items would be separate property for each of them. Once they get married, their separate property maintains its character as separate property.

2. Marital Property

But let’s assume Harold gets a job paying $100,000.00 per year after the marriage, or keeps his $100,000.00 per year job after the marriage ceremony. Though Wilma does not help him in his job, but rather is a stay at home wife, any money that Harold makes from his active efforts at the job is marital property.

This means that half of Harold’s income is the property of Wilma. This may seem unfair, but courts have the strange idea that a marriage is a partnership venture, and that the time one spouse spends away from another to earn a living for the two of them hurts the spouse left behind because that spouse is deprived of the other’s company and companionship. Thus it is only fair to compensate the spouse left behind by considering the money as joint property.

Thus when a man sends his wife out in the world to work and lies prostrate upon the couch all day watching cable TV, drinking beer, and wishing it were an autumn Saturday so college football would come on, the law entitles him to one half of whatever his wife earns. The same situation obtains when the wife rises as the crack of noon and watches her soap operas all day while eating bon bons and complaining that her husband did not make the beds or unload the dishwasher.

Let’s get back to Harold and Wilma. If they purchase a Toyota Camry so that Harold does not have to freeze his balls off in the winter driving to work on his motorcycle, and if they use the money from Harold’s job earnings paid after the marriage ceremony to do so, then that Toyota Camry is marital property.

If the marriage of Harold and Wilma ends up on the rocks and in a divorce court, the fact that the Toyota Camry is titled in Harold’s name won’t make the slightest difference to the judge. If the judge finds that it was purchased during the marriage using marital funds, then it is marital property and must be divided (or more likely, the spouse not receiving the car will get an offset of other property of similar value to even things out).

This brings us to a point that bears repeating. A divorce court is not bound by whose name the asset is in. Husbands who are pleased to think themselves clever by putting everything in their name thinking this means their wives will get nothing upon divorce are in for a surprise. An asset is either marital property or it is separate property, and that is determined by the divorce court, not the Ohio Bureau of Motor Vehicles or the County Recorder’s Office or Bank Records.

3. Antenuptial Agreements as Ledgers

This brings us to the very first use of an antenuptial agreement. It can (and as we will see later must) define the assets and liabilities of each spouse before they are married. This serves as an accurate and easy marker for a court to consider when weighing up what is separate property and what is marital property. In this way, the court does not have to puzzle over whether the Honda motorcycle is Harold’s separate property, because it says it is right there in the antenuptial agreement.

B. Transmutation: Blurring the Lines Between Separate and Marital Property

Where things get tricky is when Separate Property turns into Marital Property. How does that happen? Let’s look at some Harold and Wilma examples.

1. Active Efforts to Improve Separate Property

Remember that Wilma came to the marriage with a 1965 Ford Mustang which was sitting in a barn with no engine. As it sits there, it has a value of about $500.00, though the mice living in the glove compartment see things differently.

As a hobby, Harold and Wilma spend their weekends working on restoring this car. They put in a rebuilt engine, they run the mice out of the interior and put in new leather seats. They redo the top so that the convertible function works perfectly and does not leak. They get rid of the rust on the body and paint it powder blue. All of this is done using marital funds and marital time on marital weekends.

After a year of such activity, the vehicle is now worth $25,000.00 as a show car and they drive it in parades, hauling around homecoming kings and queens that these ethereal beings might wave at the onlookers for the lasting betterment of society.

A judge in an Ohio divorce court is most likely to see the Ford Mustang, though it may have started out as Wilma’s separate property, as having “transmutated” into marital property. This is so because of the active efforts and expenditures of marital funds, during the marriage, which increased the value of the asset from next to nothing to something quite significant. At best, Wilma will get a $500.00 credit for the value of the asset at the start of the marriage.

But had Wilma insisted upon an antenuptial agreement which defined the Mustang as separate property regardless of any improvements after the wedding, then a judge might well rule that any increase in value of the vehicle was Wilma’s entirely.