When Does Joint Ownership Begin and End?

Married clients often ask me whether all of their combined assets are considered “joint”. The answer to this question in New Jersey (to the surprise of many clients) is no.

New Jersey is a separate property state. This means that if an asset is owned by one spouse, absent a written statement or account title that joint ownership was intended, it is owned solely by that spouse. That spouse may do whatever he or she wants with the asset without input from the other spouse (with a few exceptions).

For those curious, all of the above rules change when a divorce is filed. At that point, all of the property owned by the spouses potentially goes into a pot for “equitable distribution”. During “equitable distribution” the judge sitting in the divorce action may reallocate ownership of the assets. This is one reason that premarital planning can be so important.

This presumption of separate property (at least until a divorce happens), is very strong. In a recent case, a husband withdrew funds from a bank account and used them to purchase some jewelry. After his death, there was family infighting about whether this jewelry was jointly owned with his wife, or was his separate property. The court ruled that as soon as the funds were withdrawn from the joint bank account, they lost their joint character and belonged solely to the husband. The jewelry he purchased with those funds, therefore, was not jointly owned with his wife, and she had no right to it. See Connell v. Connell, 93 So. 1140 (Fl.App. 2012).

Joint ownership has many consequences for inheritance and also taxation. If you have any questions about it, feel free to contact me.

TAX ADVICE DISCLAIMER: Any tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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