Is This Marital Property or Separate Property? — Part I
When a couple separates a divorce compliant is filed, there are a myriad of issues that must be addressed — and if they don’t separate amicably, many of those issues have to be decided by the court.
One common question often asked is question that comes up before divorce court: ” Whether this thing is marital property, and subject to division between the parties — in other words, owned by the couple as an entity –, or is it separate property, and owned by one individual and not the other?”
The Overriding Goal: Supporting the Family
The primary consideration of the court during any divorce proceeding is to set up the family (largely interpreted as ‘the children’) to have a secure future going forward. Almost every other factor listed below can and will be set aside in order to accomplish this overriding goal.
The Default Rule: When Was the Property Acquired?
The ‘default’ rule in determining whether property is marital or separate is whether the property was acquired before the marriage existed. Anything that you brought into the marriage is arguably, according to Michigan State law, yours. Anything your spouse had when they married you separately their own. Anything that was acquired after the marriage contract was signed but before the divorce is finalized is considered part of the ‘martial estate’, which must by law be divided equitably between the divorcees. It is henceforth considered separate property, which each divorcee having no legal interest in the other’s portion of the marital estate. Of course, there are several details and exceptions that modify this rule.
Intent to Separate: It might seem odd to wait until the divorce is finalized to start separating assets — and in fact in some states property ceases being an assumed part of the marital estate the moment that a couple shows intent to separate (as shown by filing for divorce or maintaining separate homes.) And while the law in Michigan does assume that property is marital until the divorce is finalized, there is leeway given. The court may recognize that a given acquisition was performed entirely by one party without the cognizance or contribution of the other and decide that only that party should have an interest in the acquisition. They’re far more likely to make that recognition when the asset was acquired after the couple ceased operating as a financial unit.
Contribution to Growth: Similarly, some property that would normally be assumed separate can be deemed to be partially or wholly marital if the non-owning spouse contributed meaningfully to the growth of the asset over the course of the marriage. For example, if you own a home before you marry, but over the course of the marriage your spouse invests a meaningful amount of time and money into the home in a way that makes it significantly more valuable. The court must take into consideration the value added to the asset by each spouse, even if only one spouse brought it into the marriage.
Marital Commingling: Also similarly, it’s quite possible for a particular item to become martial property through a process called ‘commingling,’ which happens when separate assets are used as part of martial assets. For example, say your spouse comes into the marriage with a gemstone collection, and you come into the marriage with a gemstone collection. For the duration of your marriage, you treat the combined collection as one set, buying, selling, adding to, and trading with the collection without regard to who originally brought which parts into the whole, the courts are very likely to determine that the collection is a single martial asset. They may even do so if you agree that the collection as a whole was held by one or the other of you in specific during the marriage.
That’s not all of the factors the court must consider when separating property during a divorce — but it’s all we have space for right here. Come back next time for the rest of the details!