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How To Keep Your Separate Property Separate

One of the most heavily litigated issues in divorce cases is deciding how, if at all, a party should get credit for his or her separate property.   When dividing assets in a divorce case, Michigan law first calls for the analysis of what is separate property (i.e. typically not divided) and what is “marital”  (i.e. property that was accumulated during the marriage and therefore divisible). So, what is separate property and what is marital property?  More importantly, how do you make sure that your wife cannot get your premarital or other separate assets in a divorce? 

Separate property takes several different forms, including:

--Property you own at the time of the marriage.

– Property you obtained by gift or inheritance, so property that you received from a deceased relative, real estate received by inheritance, or funds provided by gift, to name a few examples.

– Property obtained in exchange for pre-marital property or gifted or inherited assets.  One example would be a house that you owned prior to the marriage, which you then sell and you use the proceeds from the sale to buy a new house during the marriage.

– Property agreed to be separate by valid agreement between you and your wife, such as property earmarked as belonging to you pursuant to a prenuptial agreement.

We have consulted with hundreds of clients over the years in which someone had a house prior to the marriage, put their spouse on the title to that house during the marriage, and then thinks they will automatically just get the equity back at the time of divorce.   We wish it were that simple.

In Michigan divorces, any property obtained during the marriage is assumed to be marital property unless it can be proven otherwise. Therefore, it is essential, if you believe you have property that should be considered your separate property, that you get and maintain proof of why it is separate. For example, if you owned a house, bank account, or retirement account before the marriage, you should maintain documentation showing what you owned at the time of marriage and the value of those assets. Any increase in value from the date of marriage to present may be considered marital property, so it is important to keep track of the starting value of those assets. This, along with many other reasons, is the true value of a pre-nuptial agreement where both parties provide full disclosure—including values—of any and all assets each owns prior to the wedding.  However, even without a prenuptial agreement, documentation of what you bring into the marriage will be helpful to your case.

Likewise, keep good records of any gifts or inheritance you receive during the marriage. If the person gifting or bequeathing those assets intends them to be for just you, ask them to ensure that any checks or other transfer documents are made out to you alone. 

Along with keeping the property in your sole name, it is also important that the property not be combined, or commingled, with any marital property. Mixing separate property with marital property can lead to an argument that the separate property has become marital in nature. For example, if a check for an inheritance is deposited into a joint account, there is an argument that those proceeds became marital in nature.  Ultimately, it can become impossible to trace the separate property funds and therefore those funds will likely be considered marital and subject to division by the court in your divorce case. The best rule of thumb is to just keep any separate property, whether premarital or received during the marriage, in your name and not your wife’s name.

Also, if you have a separate or premarital account, you should avoid depositing your pay check or other income into that account. When you get paid, the funds you receive are considered marital. If you mix those funds into your separate property account, regardless of titling, an argument can be made that you commingled marital and non-marital funds to the point of the separate account losing its separate identity.

Documentation is king when it comes to sorting these things out. Unfortunately, most people are unaware how important their record keeping might be in the event that a divorce situation arises. Though some financial institutions keep records for significant amounts of time, some do not.  It is up to you to keep valid records regarding separate property during your marriage

So what does all of this mean to you?  In general, you should be able to keep your separate property separate in a divorce case.  A prenuptial agreement will help ensure this, but isn’t mandatory. Any property that is considered to be marital property will generally be split equally between you and your wife.  The key to protecting your separate property is to keep track of what you had, avoid commingling it with other assets earned during the marriage or in your wife’s name, and provide your attorney with the facts needed to protect you. I often tell clients early on the in the planning stages of the divorce to go out and research to find those account statements, tax assessments, trust documents, etc. that will help us preserve those assets.  Every dollar we find will save you fifty cents when the judge bangs the gavel.

 

About ADAM (American Divorce Association for Men)

The American Divorce Association for Men (ADAM) is a group of highly qualified attorneys who advocate for men’s rights in divorce, child custody and parenting time, paternity, support, property settlement, post judgment modifications, and other family law matters. Since 1988, ADAM has been aggressive, diligent, and uncompromising when representing their clients. A team of compassionate and skilled family law attorneys, ADAM is dedicated to being Michigan’s leading divorce attorneys for men.

 

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