What is the real effect of reinvested dividends on separate property?

[ryanf1475]

Maybe this varies from state to state, but let's say a young chap owns a brokerage account worth 1 million dollars of various securities before his marriage. For a couple of months after his marriage, the dividends are reinvested into the same account, totaling a few hundred dollars. Then, he reconfigures his account to sweep future dividends into a community account. Does this really mean that the million-dollar account is now community property? Or, in the even of divorce, are the few hundred dollars' worth of dividends usually parsed out easily enough given that there is a clear record of them?

 

[adjusterjack]

Yes, might vary from state to state, but let's take CA (a community property state) for example.

Family Code Chapter 2. Separate Property
(a) Separate property of a married person includes all of the following:
(1) All property owned by the person before marriage.
(2) All property acquired by the person after marriage by gift, bequest, devise, or descent.
(3) The rents, issues, and profits of the property described in this section.

Codes Display Text (ca.gov)

My conclusion is that only the comingled dividends become community property.

But that's just for CA. Feel free to make a list of other community property states and look up the community property statutes.

Keep in mind that an "equity" state may treat the million dollars differently.

 

[Bali Hai Again]

Maybe this varies from state to state, but let's say a young chap owns a brokerage account worth 1 million dollars of various securities before his marriage. For a couple of months after his marriage, the dividends are reinvested into the same account, totaling a few hundred dollars. Then, he reconfigures his account to sweep future dividends into a community account. Does this really mean that the million-dollar account is now community property? Or, in the even of divorce, are the few hundred dollars' worth of dividends usually parsed out easily enough given that there is a clear record of them?

A prenup, drawn up by a savvy divorce lawyer is the only way to go with this much money at stake.