When is Separate Property No Longer Separate?

Divorce judgment must provide for the division of the couple's property. What this means is that any property that is considered "marital" must be divided. Property that is considered "separate" is, with limited exceptions, not subject to division. So, When Does Separate Property Become Marital?

In any Michigan divorce, the divorce judgment must provide for the division of the couple’s property. What this means is that any property that is considered “marital” must be divided. Property that is considered “separate” is, with limited exceptions, not subject to division.

Therefore, before a Michigan court can attempt to divide a couple’s marital property, it must determine what is marital property in a given case. In general, property acquired by either party during the marriage is considered marital. This includes a party’s paychecks (even if squirrelled away in a private bank account in that party’s name), purchases made by the parties, even the goodwill in a family business started during the marriage. Even if property starts out as separate, however, it can be converted into marital property, subject to division in a Michigan divorce.

How Separate Property Can Become Marital

Certain assets are considered the separate property of either the husband or wife. This includes property either one acquired before the marriage, or property either party acquired during the marriage by gift or inheritance. Also considered separate is property earned after the divorce judgment is entered. (Property like a performance bonus at work, that was earned during the marriage but paid afterward, is still considered marital.) Passive appreciation of separate property, even if it takes place during the marriage, is considered separate property as well. However, just because property starts out as separate doesn’t mean it will remain that way. The primary way that separate property becomes marital is through “commingling.”

For example, if the husband receives a check for twenty thousand dollars from Great Aunt Edna, and deposits that check in an account in his name only, those funds will remain separate. If, however, he deposits the money in the couple’s joint bank account, or uses it to make mortgage payments on the marital home, he has commingled those funds. When the couple divorces, the husband cannot simply claim that he should receive twenty thousand dollars more from the joint bank account or from the value of the marital home. By his actions, he has made once-separate funds marital.

Another way property can become marital is if the spouse who does not own the property can prove that he or she “contributed to the acquisition, improvement, or accumulation of the property.” Michigan Compiled Laws 552.401 expressly grants courts the discretion to divide all or part of the separate property in such a case. An example might be a dilapidated family cottage inherited by one spouse, to which the other spouse contributed funds and “sweat equity” to renovate.

Even if property is indisputably separate, under some narrow circumstances, a Michigan court may award it to the non-owner spouse. If the non-owner spouse can demonstrate that without including this separate property, the marital estate would not be sufficient for his or her suitable support, Michigan Compiled Laws 552.23 permits the court to “invade” the separate property for the benefit of the non-owner spouse.

When is separate property no longer separate? When Does Separate Property Become Marital? Ask The Attorney...

Keeping Separate Property Separate

Often, a husband or wife who has or acquires property is simply not thinking about the possibility of divorce or whether property is considered marital or separate. It’s always helpful to consider the “what-ifs,” however.

Obviously, one simple option for keeping  property separate in a Michigan divorce is to keep it titled separately. Another way is to enter into a prenuptial or postnuptial agreement in which both parties agree that certain property will remain separate. It’s worth noting, as well, that if the couple is able to reach agreement about how their property should be divided on their own or with their attorneys’ help, the issue of “separate” versus “marital” property will never come before the court.

If you have concerns about the characterization of property as “marital” or “separate” in your Michigan divorce, talk to an experienced Oakland County divorce attorney. Attorney James Hubbert can advise you as to how Michigan divorce law is likely to apply to the facts of your situation, and can protect your property rights in divorce.