WHAT IS SEPARATE PROPERTY IN A DIVORCE?

DID YOU KNOW the definition of Separate Property?


DIVORCE LAW IS FILLED WITH WORD OF CLOUDY MEANING.


Words like “marital property” lack statutory definition, so  does  “separate property”. A question your  divorce attorney will have to ask is when does  a  valuable asset become  characterized as separate property, as well as the starting point when identifying property per Reeves. An easy definition is that  separate property is the  flip side to marital property, and is generally not subject to division between the parties.


Terry Ray Bankert is a Michigan Attorney specializing in Family Law, and works as a Flint Divorce Attorney, Flint Divorce lawyer, Genesee Divorce Lawyer and Genesee Divorce Attorney.(SEO) For help with your questions call 810-235-1970. Or http://www.attorneybankert.com/  . Principle Source ICLE 09/16/10



So when do we havs Satutory Authority to Invade  or take Separate Property

The two statutory exceptions are a §401 “contribution” claim, and a §23 “insufficiency” claim (MCL 552.401 and MCL 552.23).

These two statutory exceptions are set forth below.

The first exception, a §401 “contribution” claim, is:

The circuit court of this state may include in any decree of divorce or of separate maintenance entered in the circuit court appropriate provisions awarding to a party all or a portion of the property, either real or personal, owned by his or her spouse, as appears to the court to be equitable under all the circumstances of the case, if it appears from the evidence in the case that the party contributed to the acquisition, improvement, or accumulation of the property. The decree, upon becoming final, shall have the same force and effect as a quitclaim deed of the real estate, if any, or a bill of sale of the personal property, if any, given by the party’s spouse to the party.


The second exception, a §23 “insufficiency” claim, is:

Upon entry of a judgment of divorce or separate maintenance, if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage as are committed to the care and custody of either party, the court may further award to either party the part of the real and personal estate of either party and spousal support out of the real and personal estate, to be paid to either party in gross or otherwise as the court considers just and reasonable, after considering the ability of either party to pay and the character and situation of the parties, and all the other circumstances of the case.


Reeves implicitly overruled an earlier line of cases which held that separate property was simply another factor to consider when fairly dividing the entire estate. Because of Reeves and its progeny, general principles of equity do not constitute a sufficient reason for the invasion of separate property under either statutory exception. See, for example, Schneider v Schneider, unpublished opinion per curiam of the Court of Appeals, issued October 28, 2003 (Docket No. 245578) slip op pp 2–3.

C. Burden of Proof

There are no reported cases that expressly define which party bears the burden of proof in a separate property claim. However, it appears from the cases that the owner-spouse must prove a separate property claim in order to keep the property separate, and the nonowner-spouse must prove a statutory exception on order to justify invading the separate property.


These separate property claim frequently occurs in second marriages involves the ownership of a home by one of the spouses at the time of the marriage. In that case, establish both the fair market value of the home (and, therefore, the equity of the owner-spouse) at the time of the marriage, as well as the current fair market value of the home. All qualified real estate appraisers have access to historical records to adequately prepare an appraisal report for the value of a home even decades in the past.

Here are some examples of Separate Property

A. Premarital Property



Premarital property, that is, property a party owned before the marriage, is separate property. Reeves, Lee, and Korth v Korth, 256 Mich App 286; 662 NW2d 111 (2003).



B. Property Acquired During Cohabitation



Property acquired during cohabitation is separate property. Reeves. The footnote, which in one fell swoop created critical law in this area, is worth reproducing in these materials:



Rather than focusing on the four years the parties had been married, the court said it was equitably considering the parties to have been married for eight years. This was error. Michigan does not recognize common-law marriages. Carnes v Sheldon, 109 Mich App 204, 211, 216–217; 311 NW2d 747 (1981). Cohabitating with someone is not the same as marrying them. Further, Bone, supra, required the court to look at the period that began with the marriage. A court is not free to expand this period to include any cohabitation that may have occurred before the parties marry. Reeves at 493 n 1.[10][Emphasis supplied.]


What Reeves is to property, Korth is to spousal support. The Korth court’s rationale was stated as follows:


Although the past relations and conduct of the parties is one factor the trial court may consider in determining whether to award spousal support, Michigan has a strong public policy supporting the institution of marriage…. This policy was undermined by the trial court’s holding in the present case. The trial court was required to limit its consideration to “the length of the marriage,” not the length of the relationship, in awarding spousal support.

C.Inherited Property



Inherited property is, at least where it has been kept separate from marital property, is generally treated as separate property. Lee, Dart, and Wells v Wells, unpublished opinion per curiam of the Court of Appeals, issued November 20, 2007 (Docket No. 271465) (parent’s conveyance to son of family farm deemed “pre-inheritance transfer”, thus separate asset).



D. Gifted Property



Gifted property, at least that which is intended for the donee-spouse only, has traditionally been considered separate property. Brookhouse v Brookhouse, 286 Mich 151; 281 NW2d 573 (1938); Hackert v Hackert, unpublished opinion per curiam of the Court of Appeals, issued May 5, 1995 (Docket No. 153308) (jewelry and part of a doll collection given to W by H during the course of the marriage were items of personal use or adornment, and therefore separate property of the recipient spouse); and Francis v Francis, unpublished opinion per curiam of the Court of Appeals, issued June 13, 1995 (Docket No. 150780) (H’s gift to W of a diamond engagement ring was W’s separate property). But, see Hance v Hance, unpublished opinion per curiam of the Court of Appeals, issued August 21, 1998 (Docket No. 200684) (interspousal gifts of jewelry deemed marital property).



E. Damages for Pain and Suffering



Pain and suffering awards in the context of personal injury cases are separate property (as opposed to economic losses covering the time of the marriage). Bywater v Bywater, 128 Mich App 396, 398; 340 NW2d 102 (1983); Lee at 79; and Stoudemire v Stoudemire, 248 Mich App 325, 339; 639 NW2d 274 (2001). But, see Pickering v Pickering, 268 Mich App 1; 706 NW2d 835 (2005) (lawsuit proceeds deemed marital asset where both H and W were plaintiffs [H injured riding bicycle; W loss of consortium], joint check issued and deposited to joint account, and parties treated the settlement proceeds as a joint marital asset).



F. Pre/Postmarital Retirement Benefits



Although presumptively separate property, premarital pension benefits may be treated as part of the marital estate, per Booth v Booth, 194 Mich App 284, 291; 486 NW2d 116 (1992), and pension contributions made post-divorce are assets which may be considered part of the marital estate, per Boonstra v Boonstra, 209 Mich App 558, 563; 531 NW2d 777 (1995).



A thorny question arises when a portion of a defined contribution plan, such as a 401k, was accrued prior to the marriage, but investments in the plan continued during the marriage. It is easy to identify the account balance at the time of marriage and return that to the contributing spouse as his/her separate property upon divorce. But does that, without more, shortchange the contributing spouse by denying him/her the benefit of earnings during the marriage on those premarital contributions? With sufficient economic data or testimony, it should be possible to segregate earnings on premarital contributions (which in theory are separate property) from earnings of contributions made from income during the marriage (which is clearly marital property). Yet this approach was rejected recently by the Court of Appeals in the unpublished of Skinner v Skinner, Court of Appeals No. 289740, decided 5/18/10.[11]



Drafting Tip: The language used in Booth and Boonstra to describe the process of awarding a portion of separate property to the nonowner-spouse, “treated/considered”, is not technically correct. Frankly, sloppy use of language creates confusion. Purists, like James P. Ryan, Esq., of Plymouth, point out that the proper language is, instead, “invaded/divided”.



G. Why It Matters - Invasion of Separate Property



Notwithstanding a characterization of an asset as “separate”, the tenacious and creative practitioner will find case law on both sides of most of these issues. Other legal concepts like “commingling” may destroy the separate nature of an otherwise separate asset, and thereby permit the court to treat the asset as marital property.



The cases are obviously fact-intensive, and much depends on the development of the proofs. The key is to understand that a marital asset is subject to division using the equitable factors found in Sparks, while a separate asset may only be divided if either of the statutory exceptions is met.



A. Motion for Partial Summary Disposition pursuant to MCR 2.116 when dealing with separate property claims, particularly when a §23 “insufficiency” claim is not asserted. You educate the court on your claim (either that the asset is separate or marital), and a ruling either way should greatly assist in resolving the case.



Defining the marital estate is not easy. Neither is defining what “marital” and “separate” property are. Ultimately, it is a matter of advocacy, that is, persuading the fact-finder based on knowledge of the law and what makes common sense in a particular fact-pattern. The intent of these materials is to make you a better advocate




Terry Ray Bankert is a Michigan Attorney specializing in Family Law, and works as a Flint Divorce Attorney, Flint Divorce lawyer, Genesee Divorce Lawyer and Genesee Divorce Attorney.(SEO) For help with your questions call 810-235-1970. Or http://www.attorneybankert.com/ . Principle Source ICLE 09/16/10