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What Is Considered “Separate Property” In A Divorce Proceeding In Michigan?

 

One of the most important aspects of a divorce proceeding is the division of the property.  A married couple can spend many years accumulating wealth and items of both material and sentimental value.  However, before a court can consider the division of marital property, it must first determine if the property is actually marital or separate property.

The general rule of thumb is that marital property is property received DURING the marriage that is subject to division and that separate property is property received by a spouse BEFORE the marriage that is subject to full restoration to the original owner.  Michigan law states that, “[u]pon the annulment of a marriage, a divorce from the bonds of matrimony or a judgment of separate maintenance, the court may make a further judgment for restoring to either party the whole, or such parts as it shall deem just and reasonable, of the real and personal estate that shall have come to either party by reason of the marriage, or for awarding to either party the value thereof, to be paid by either party in money.”  MCL 552.19.  If an item is classified as separate property, then it is given to the owning spouse without regard to the “fair and equitable” division of the marital property.  As such, it is advantageous to either spouse to claim as much assets as separate property as possible.

Unfortunately, like most things, deciding what is marital property and what is separate property is not always easy.  Income earned by one spouse during the duration of the marriage is presumed to be marital property, even if the other spouse never held a job or occupation.  Byington v Byington, 224 Mich App 103, 112; 568 NW2d 141 (1997).  “The mere fact that property may be held jointly or individually is not necessarily dispositive of whether the property is classified as separate or marital.”  Cunningham v Cunningham, 289 Mich App 195, 201-202; 795 NW2d 826 (2010).  For example, if a husband purchases real estate during the course of the marriage and it is titled in his name only on the warranty deed, it does not prevent that real estate from being classified as marital property.

The following items are generally presumed to be separate property:

  • PREMARITAL ASSETS: Property that a party earns or obtains before the date of the wedding, whether it is real or personal property, still remains separate property after marriage (Michigan is not a community property state).
  • INHERITANCES: “Normally, property received by a married party as an inheritance, but kept separate from marital property, is deemed to be separate property not subject to distribution.”  Dart v Dart, 460 Mich 573, 584-585; 597 NW2d 82 (1999).
  • PERSONAL INJURY LAWSUIT PROCEEDS: Proceeds received by one spouse in a personal injury lawsuit meant to compensate for pain and suffering, as opposed to lost wages, are generally considered separate property. Washington v Washington, 283 Mich App 667. 674; 770 NW2d 908 (2009).  However, personal injury proceeds can be considered marital property where the original suit involved a loss of consortium claim and the settlement check was made out to both parties.  Wilson v Wilson, 179 Mich App 519, 521, 524; 446 NW2d 496 (1989).

However, separate property can lose its character and become marital property if it is “commingled” with the marital estate.  For example, a spouse’s workers compensation award that was originally separate property transformed into marital property when he used the proceeds to purchase the marital home during the marriage.  Cunningham v Cunningham, 289 Mich App 195, 210; 795 NW2d 826 (2010).  Likewise, a spouse who received an inheritance but placed the proceeds in a joint account and then used it to pay off the mortgage on the marital home transformed the nature of the property from separate to marital.  Lagalo v Lagalo, unpublished per curiam opinion of the Court of Appeals issued June 26th, 2012 (Docket No. 303929).  Separate property does not automatically change as a result of the marriage, but it may change based on the owner’s actions afterwards.

It is possible for a piece of property to be partially classified as marital property and partially classified as separate property.  For example, if real estate started as separate property before the marriage for one of the spouses, subsequent commingling and improvement can cause a significant amount of its value to become classified as marital property at the time of divorce.  In Korth v Korth, 256 Mich App 286; 662 NW2d 111 (2003), the husband purchased real property on the lake prior to the marriage.  Subsequently, he added his wife to the deed to the property.  The parties then cleared the land and built a home on the property, with the wife contributing 5% to 10% of the labor and $7,500.00 to the cost.  While staying at the property, the wife did the cooking, cleaning and other chores.  “Because [the wife] contributed to the improvement of the property after the parties were married, the trial court properly considered the equity in the property after the marriage as part of the marital estate.”  Id at 292.  However, the   However, the down payment, the equity built up before the parties’ marriage, and any appreciation that occurred before the marriage should be considered part of [the husband]’s separate estate.”  Id at 293.

Intention may also dictate if a party remains separate property.  For example, the parties may execute a written premarital agreement that specifically designates that certain property remains separate, even if it is a financial account that earns passive income during the course of a marriage.  Reed v Reed, 265 Mich App 131; 693 NW2d 825 (2005).  Even if there is no written agreement, the party’s spoken intent can control the characterization of the property.  In Powers v Powers, unpublished per curiam opinion of the Court of Appeals issued June 5th, 2012 (Docket No. 301868), the circuit court did not error in holding that a condominium owned before the marriage by one spouse, but subsequently invested into by both spouses, was considered separate property because the parties admitted in their testimony that it was always understood that they were inclined to hold their respective assets as separate property.  It is not uncommon for spouses during divorce proceedings to make self-serving testimony of their “intent” to secure an advantage on property division.

When your spouse makes a false claim to separate property during a divorce, you need an aggressive lawyer in your corner that will advocate for the truth and ensure you get your fair due.  You only get one opportunity to obtain a favorable property settlement and it is not modifiable once the judgment is final.  It is important to secure excellent legal representation from the very beginning to protect your rights before it is too late.

If you or a loved one are facing any family law matter and need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.

 

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