Property that you previously owned as opposed to marital property. Is your ex-spouse entitled to anything you had before the marriage if you divorced? The marital assets are what we divide when dealing with divorces. Different from separate property, this is. These possessions did not develop during the marriage. Prior acquired property vs. marital property in Michigan.
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The designation of something as non-marital does not necessarily make it such. This will depend on how the partners behave. The non-marital property’s attribute can change to become a marital item. Before getting married, you accumulated $100,000 and put it in a bank account. Your tears, sweat, and blood went into the 100K. Your $100,000 is a distinct asset. Throughout the marriage, you took that $100,000. Place it in another account. By doing that you changed the 100K’s character. You gifted it to the marriage. It is now considered marital property. Your spouse now owns half of the $100,000. You can decide to leave the 100K alone and let it increase. If the value has increased to $120,000 during the divorce, the $20,000 is regarded as a marital asset. It is going to be divided.
What is separate and marital property in marriage?
The marital property is shared by both partners. As part of the asset distribution in a divorce, you receive half of each asset’s value and your spouse receives the other half. All marital property is owned jointly by you and your spouse in Michigan. Protect the assets that are supposed to be yours. Consult your trusted Michigan divorce lawyer to protect your assets during and after divorce.
Marital property
Any asset acquired during the marriage is a marital property. Such assets may be material or intangible. The home the couple bought just after their wedding is a marital property. The income the wife received working as a front desk officer during the marriage is a marital asset. The spouse’s retirement plan is also a marital property.
Separate property
Assets acquired before marriage like presents received during a marriage are separate property. Inheritances obtained while married are separate property of the recipient spouse. One spouse may receive damages for pain and suffering in a personal injury action. Those damages are viewed as separate property.
Separate property may not remain so. This may depend on how the parties treat it. Separate property may inadvertently end up subject to property division.
What do you mean by commingled assets?
It’s important to keep in mind that, from a legal standpoint, separate property may occasionally overlap with or change into marital property over the course of a marriage. For instance, if the independent property was combined with the marital property or if it was used for the family’s benefit.
Contributing to the acquisition of an asset
If the spouse receiving the property “contributed to the acquisition, improvement, or accumulation of the property,” the receiving spouse may be entitled to a share of the other’s separate property. This exemption may take the form of a vacation home that one spouse inherited and greatly increased in value with the assistance of the other spouse. It could also take the form of one partner taking on childcare and housework responsibilities so the other spouse can devote their entire attention to expanding a business they started before getting married.
An example of commingling
After purchasing their new marital house, the couple discovers that it needs a lot of upkeep. For many of the renovations, the pair is dependent on the funds from one spouse’s savings account, which she created before the marriage. The house’s worth later increased as a result of the changes. One of the partners already had a savings account before they got married. When she marries, she wishes to purchase a home with her spouse. She pays the down payment on the marital home with money from her personal savings account. The wife sells equities she bought before the marriage to raise money for a small business she and her husband want to establish together. It’s possible for independent property to unintentionally mix with marital property. In Wolcott v. Wolcott, unpublished judgment, the woman was given 10% of a family business as a present soon before the pair got married. She was employed by the business as well.
Throughout the marriage, the pair maintained separate bank accounts, and the wife received payments from the company related to her stock ownership that were deposited into a bank account that was solely in her name. When the couple got divorced 16 years later, the trial court ruled that the stock and the bank account belonged to the woman individually. The Michigan Court of Appeals, however, ruled on March 11, 2021, that the stock and bank account had been combined and were marital assets because of two circumstances:
- The wife’s earnings from her job, which are normally considered a marital asset, were placed into the same account as her stock distributions; and
- Throughout the marriage, the wife used distributions from the company stock in addition to her other sources of income to pay for joint costs and household bills.
There’s a held belief about the mixing of assets. Money that can be traced back to a distinct source will remain separate property. It will not be divided in the case of a divorce. A recent exception to the general norm was created by the Michigan Court of Appeals. The Michigan Court of Appeals rendered a decision in Cunningham v. Cunningham on July 13, 2010. The down payment could be linked to one party. An asset before the marriage was invested in the marital house during the marriage. The asset became marital property.
What do you mean by invasion of separate property?
The Court will attempt to divide the remaining assets in the marital estate. Attempting this division with no part going to the other party. Each party should have received their own separate property already. There are two significant exceptions: the Court may “invade” one spouse’s separate property. Divide it nonetheless. These are in cases of a demonstration of “substantial need” or “contribution.”
The substantial need exception
In Michigan, there is an exception to the rule that separate property cannot be divided in a divorce. This exception is called the “substantial need” exception. The substantial need exception allows a court to divide the separate property. This is when the property awarded to one spouse is not enough. It is insufficient to provide for their suitable support and maintenance. You have to prove that you meet the substantial need exception. A spouse must show that they have needs that cannot be met by the property that they were awarded in the divorce. These needs can include things like medical expenses and child care expenses. It can also refer to housing expenses. The substantial need exception is a powerful tool. It can help spouses who are struggling to make ends meet after a divorce. If you believe that you may meet the substantial need exception in your case, talk to an experienced family law attorney in Michigan about it.
The contribution exception
The “contribution” exception derives from Michigan Compiled Laws. It provides that the court may invade separate property when the other spouse “contributed to the acquisition. The spouse helped in the improvement or accumulation of the property. One spouse assists in the acquisition or growth of a spouse’s separate asset. The court may consider the contribution as having a distinct value deserving of compensation. A common example of this is a home purchased before marriage. An asset that becomes the marital home after the couple marries. The longer the parties live in the home, the more marital the home becomes. There is no definitive rule on timing. The theory is that the non-purchasing spouse is contributing to mortgage reduction. The spouse is contributing to the upkeep and maintenance.
The law in this field is generally understandable and well-founded. It might not quite match what appears fair from the outside. It may seem appropriate to segregate things. Separating different bank accounts and each spouse’s respective income. This is not at all uncommon. A judge’s assessment of the facts will always influence how the law is applied. How widely were the monies mixed? Is an invasion necessary? How much did one spouse contribute to the separate property of the other? What was it that the parties actually wanted to keep private? Argue your position before a judge. Learn the process courts use to analyze cases. A property settlement can be negotiated without going to court for help.
What will most likely be subject to property division in a divorce?
Your entire marital estate was fully disclosed. The assets of the marriage were divided. Most of your or your spouse’s possessions have been accumulated during your marriage. If there is a title or deed, it doesn’t matter whose name is on it. These assets are still regarded as marital property unless they were received as a gift or inheritance. You both own anything that is marital property.
The marital home
Your marital home is where you live. This is where you stayed with your spouse during the marriage. You can keep the marital home if it was awarded to you as part of the final judgment. Discuss this with your partner. The spouse who currently owns the family home shoulders its expenses. Expenses include things like maintenance, property taxes, and mortgage payments. Only one of you can pay these expenses, so only one can receive them. That person should remain in the house because it makes sense. When neither party can afford the house on their own, the only option is to sell it and divide the proceeds.
Your pension or retirement plan
Pensions or retirement accounts acquired during a marriage are marital property. It is among the assets that qualify for property division. Your spouse gets a part of the non-employee spouse’s pension or retirement plan. Pensions or retirement accounts acquired during a marriage are regarded as marital property. It is among the assets that qualify for property division. They are entitled to a part of the non-employee spouse’s pension or retirement plan. The parties could agree to keep their separate pensions or retirement plans. You can prevent splitting them. The assets of the non-employee spouse could be offered. The asset’s worth may equal half of the retirement benefits accumulated throughout their marriage.
Your debt is also part of the final judgment
The method of equitable distribution includes debts. You treat debts incurred before marriage differently for each spouse. One example is student debt. They continue to be that spouse’s accountability. Debts are common in married life. They are viewed as shared responsibilities. The couple is jointly responsible for repayment. Take into account your auto loan, credit card debt, mortgage, and medical bills. If you own property, you are liable for any debt that is related to it. It is a part of the settlement for the divorce.
If the judgment included a mortgage on the family home, you are exclusively liable for paying it. You gain extra resources. With it, you also accumulate debt. Remember that the divorce judgment does not bind your creditors. Both of you will still be held responsible by the credit card company. You are still liable even if your partner is meant to be paying off a joint credit card but forgets to do so. Your ex-spouse is required to abide by the divorce’s conditions. Only if you step up and make the payments in the interim will your credit score rise.
The business enterprise
A firm will nonetheless be valued in a divorce even if it has no market worth or actual value. The family courts in Michigan hold that the “holder’s interest” should be the foundation for valuing a company. The company may have no value to anyone besides the proprietor. The appraiser may calculate a value depending on how important the company is to the owner. You would have paid the appraiser throughout the trial. The appraiser would have looked at the profits that the company owner had accumulated over time. The appraiser determines what an employer would pay the business owner if he or she were an employee. The sum of the two disparities was added to the business’s gross worth by the appraiser. As a result, the company’s worth increases. The company’s value was boosted by this approach of valuation. It gave the impression that the company, which has little to no value, is worth thousands of dollars. even several hundred thousand dollars.
The division of the company enterprise was decided using an artificial value. You’ll receive the other half of this imaginary value. It will be taken from other assets your spouse owns in the company. If you pay alimony, you only have this benefit. Alimony will be determined using the lower income that was utilized. The larger income will still be used to calculate child support.
How do you keep your separate assets separate?
Protecting assets against divorce can be a legal quicksand for many. Conventional thinking suggests you should have a prenuptial agreement. Prenuptial agreements are not as ironclad in Michigan. Prenuptial agreements allow parties to stipulate intentions. Determine what happens to assets in the event of their death or divorce. Designating particular assets to each spouse. They also lay forth guidelines for running the family’s business. There have been changes in how Michigan courts interpret prenuptial agreements. Prenuptial agreements’ ability to protect assets has been challenged. It is no longer as unquestionably true as it formerly was. You must keep the distinction between your property and the rest of the family’s assets. This can call for:
- Keeping an inherited fund in a separate bank account.
- Keeping your house and vehicle in your name only.
- Refraining from making repairs or upgrades to inherited property with marital funds.
- Refusing your spouse’s help in running the family business. Keeping inherited property.
- Maintain accurate property records. Establishing your personal asset is a separate piece of property.
- Refrain from adding your spouse’s name to the certificate of title of your separate property.
- Ensure the payment of taxes on real estate properties. Earnings from these properties should be drawn from sources under your name. Make sure they are coming from sources attributed to your personal account. Or, from checking accounts with your name. Get the cash from earnings of gifted or inherited property. Use them to pay for the income taxes for earnings from these separate properties.
Even though the Wolcott decision was unpublished and hence not a precedent, it demonstrates that an asset must be maintained as fully different in order to sustain a party’s claim of independent ownership of an asset. If the wife had kept a second, separate account into which she had deposited her paychecks and from which she had paid the marital expenses and household bills, the Court of Appeals most likely would have determined that the stock and the bank account into which stock distributions were deposited were the wife’s separate assets in that particular case.
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