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Michigan Family Law Blog

Friday, February 1, 2019

How is Separate Property Determined During a Divorce?

One of the commonly litigated issues in a divorce is the separation of property between the spouses. Michigan follows the equitable distribution theory for dividing property in a divorce. Equitable distribution means “fair” not “equal.” Therefore, when parties cannot agree to a property division settlement, the court determines a fair and equitable division of marital property.

A spouse may argue that certain property is separate property to prevent the court from including the property in the final property division order. However, the spouse must prove that the property meets the requirements to be considered separate property. Michigan property division lawyers work with clients to ensure that property is correctly identified to protect the client’s best interest.

Marital Property vs. Separate Property

Marital property is typically any property that the couple acquires during the marriage. Separate property is typically any property the spouse owned before the marriage. Separate property is usually awarded to the spouse who owns the property while marital property is subject to equitable distribution between the spouses.

However, some property acquired after the marriage could be considered separate property while some separate property could be converted to marital property.

Inheritances are an example of property that a spouse may receive during the marriage that may remain separate property.  Compensation for pain and suffering damages for a personal injury claim received during the marriage may remain separate property. However, as mentioned above, separate property could be considered marital property in some situations. If a spouse is not careful, separate property that was owned before the marriage or was acquired during the marriage could be converted to marital property.

How Does Separate Property Become Marital Property?

One of the most common ways that separate property is converted to marital property is by commingling the property with marital property. For example, a spouse receives an inheritance during the marriage. If the spouse deposits the money into an account in the spouse’s name only and does not deposit any other funds in that account, any money remaining in that account will probably be considered separate property.  

However, if the spouse deposits the money into a joint account and continues to deposit money into that account, the money is likely to be considered marital property. Likewise, if the spouse uses the inheritance to purchase an asset that is jointly titled with the other spouse, the inheritance can become a marital asset.

Another way separate property can become marital property is if the spouse who did not own the property “contributed to the acquisition, improvement, or accumulation of the property” during the marriage. A good example would be if the spouse who inherited money used the money to purchase a vacation home in his name only. However, he used income earned during the marriage to make improvements to the home that increased the value of the home. The added value of the home could be considered marital property.

Retirement accounts may be viewed similarly. The money in the retirement account before the marriage might be considered separate property, but the value added to the account during the marriage could be considered marital property.

Consult Michigan Divorce Attorneys Before Discuss Property Division with Your Spouse

You might have noticed that we used words such as “typically, usually, might, and may” in the above discussion of separate property. The reason is that the line between separate property and marital property can be very thin. Schedule a consult with seasoned Michigan divorce lawyer, Cameron C. Goulding today to discuss your legal options. Consulting Michigan divorce attorneys now about ways to maintain separate property during a marriage may avoid the necessity of litigating the matter should you decide to end the marriage.

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