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DIVORCE 8: Separate assets may lose their character as separate property.

A trial court’s first consideration when dividing property in divorce proceedings is the determination of marital and separate assets.  The categorization of property as marital or separate, however, is not always easily achieved, because there are occasions when property earned or acquired during the marriage may be deemed separate property.

The fact that an asset is obtained as a separate asset does not mean its status cannot change.  Separate assets may lose their character as separate property and transform into marital property.  If separate assets are commingled with marital assets and treated by the parties as marital property they may change to marital property.

In this case, the parties married in 1995 and had three children. Plaintiff first filed for divorce in 2009. At that time, defendant began living with his parents while plaintiff remained in the parties’ former marital home with the children. While the initial divorce action was pending, plaintiff’s father became ill and was hospitalized. During that time, defendant approached plaintiff about reconciling. Plaintiff’s father died in February 2010 and in March 2010, plaintiff dismissed the initial divorce action.

Plaintiff’s father left plaintiff and her two siblings, jointly, a piece of property. The property consisted of an uninhabited residence, a pole barn, and several buildings in various states of disrepair, and approximately 40 acres of land.  Plaintiff negotiated with her siblings for their interests in the inherited property. After the negotiations with plaintiff’s siblings were completed, the full title to the property was transferred to plaintiff in 2012. Plaintiff financed this buyout with a loan from defendant’s parents on which she was the sole borrower. Payments were made on this loan while the parties were still married.

The parties sold their former marital home in late 2012. They used some of the proceeds from the sale to make improvements to the farmhouse and the rest was used for household maintenance during the renovations. About one year after moving into the renovated farmhouse, plaintiff refiled for divorce. The parties settled many of the issues but went to trial regarding defendant’s entitlement, if any, to the property that plaintiff and her siblings inherited.

The fact that an asset is obtained as a separate asset does not mean its status cannot change. Property received by a married person as an inheritance, but kept separate from marital property, is deemed to be separate property not subject to distribution. 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. The actions and course of conduct taken by the parties are the clearest indication of whether property is treated or considered as marital.

Plaintiff inherited a one-third interest in the property. The other two-thirds, though part of her father’s estate, was not bequeathed to her but to her siblings, and each of those shares were obtained during the marriage.  Although plaintiff testified that she refused defendant’s request to add his name to the title in 2013 and the title to the property remained in plaintiff’s name alone, it is not dispositive of whether the property is her separate property. Rather, the court looks to the parties’ actions and conduct.

The home on the property was completely rehabilitated, improved, and updated using funds from the sale of the prior marital home. Further, defendant did the lion’s share of the work himself and received no payment. In sum the court concluded that the two-thirds interest obtained from plaintiff’s siblings was marital property and that the loan was a marital debt.

Are you facing a divorce in Michigan? Do you have questions about how your assets and your debts will be divided with your soon-to-be ex-spouse?  Financial issues are often the biggest concern for individuals and families who are facing divorce.

At the Plymouth and Ann Arbor law firm of Aldrich Legal Services, our attorneys understand the struggles you may face. We will work hard to help you obtain all to which you are entitled during your divorce.

Contact Aldrich Legal Services

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