Can My House or Assets be Used to Pay Debt of My Fiance After We Marry?
Full Question:
Answer:
Anything is possible, however it is unlikely that a successful claim could be made on your sole assets for a separate debt of your spouse that was created prior to marriage. It is possible for a spouse's property to be attached if the property is used as security for a loan, held jointly, or they live in a community property state, which California is. However, property owned only by you before the marriage will be considered separate property. If you did not use separate property to secure the debt, nor cosigned or guaranteed the debt, and the debt is the sole debt of one spouse, separate assets may not be used to pay the sole debt. However, property held jointly may be sold to recover the debtor spouse's equity to pay the debt. If you have joint bank accounts, commingled funds may be subject to pay the debt of only one spouse.
Generally, a spouse is not liable for the debts of the other as long as it is an individual account, the spouse running up the debt is not an authorized user, surety, guarantor, or cosignor, and the couple does not live in a community property state. However, even in a community property state the assets of the spouse not running up the debt could be at risk. For example, in cases involving, among others, bankruptcy, divorce, or other litigation, creditors may go after assets held jointly by the debtor and non-debtor spouse such as a bank account in both their name.
Innocent spouse is a term used as a basis for requests for relief from joint and several liability for understatement of income on a joint federal tax return and from liability arising from community property. It generally applies to a spouse who was not aware of the mistake and received no benefit from it. An individual may be found not liable for tax underpayment (including interest, penalties and other amounts) for a tax year if a joint return was filed for the tax year; there is an understatement of tax on the return that is attributable to an erroneous item by the other spouse; a taxpayer establishes that in signing the return he/she did not know and had no reason to know of the understatement; taking into account all of the facts and circumstances, it would be inequitable to hold the taxpayer liable for the deficiency attributable to the understatement; and a taxpayer elects the benefits of this provision, on the form that the IRS prescribes (Form 8857) , no later than the date that is two years after the date the IRS has begun collection activities with respect to the taxpayer. The IRS will consider whether an individual received a significant benefit either directly or indirectly, from the understatement; whether your spouse (or former spouse) deserted you; whether you and your spouse have been divorced or separated; and whether you received a benefit on the return from the understatement. Some states have also enacted similar laws, which vary by state, providing relief for innocent spouse taxpayers.
