Couples should be aware that neither spouse is the sole owner of the marital assets. When you divide your assets as part of a divorce, you receive half of the value of each asset and your spouse receives the other half. Now, how to prevent having your assets divided during a divorce. All marital assets are jointly owned by you and your spouse in Michigan. You want to make sure you safeguard the portion that is intended to be yours. Therefore, while discussing any item throughout a marriage, only 50% of the asset’s value is actually being discussed.
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If you owned a home prior to marriage and added your spouse’s name to the title of the home alongside your own during the marriage, you have just compromised your ownership of the home. In order to protect your right to half of the marital asset, you must ensure that the asset’s ownership or title remains with you. Now two people own your home. You recently donated your portion of the house to the union. Don’t compromise your ownership of the asset if you want to prevent losing it in a divorce.
Separate vs Marital Assets
Marital property is any asset that was obtained during the marriage, whether it be tangible or intangible. The house the couple purchased immediately after their wedding, the income the wife received while working as a hotel cashier during the marriage, and the husband’s pension plan are a few examples of what is commonly regarded as marital property under Michigan law.
Conversely, property bought prior to marriage, gifts received during the marriage, or an inheritance acquired while married are sometimes regarded as the separate property of the spouse who made the respective acquisition, gift, or inheritance.
In most cases, an inheritance received by one spouse during a marriage is regarded as separate property. If one spouse is awarded compensation for pain and suffering in a personal injury case while the couple is still married, the compensation is typically regarded as separate property.
Depending on how the parties handle it, property that is initially separate may not stay that way. Property may still be given to the other spouse in a divorce even if it is thought of as separate due to certain circumstances.
Separate vs Commingled Assets
It’s crucial to remember that, in the perspective of the law, separate property may occasionally intrude upon or turn into marital property throughout a marriage. Example if the separate property was commingled with marital property or if the separate property was used for the benefit of the family.
If the spouse receiving the property “contributed to the acquisition, improvement, or accumulation of the property,” the receiving spouse may be entitled to a portion of the other’s separate property.
This exception might take the form of a vacation cottage inherited by one spouse that the other spouse helped renovate, greatly increasing its value. It could also take the form of one spouse taking on household duties and child care so the other spouse can focus all of their energy on growing a business that was acquired before the marriage.
Here’s a few more cases of commingling:
The couple learns that their new marital home requires a lot of maintenance after purchasing it. The couple depends on the money from one spouse’s savings account, which she opened before the marriage, to make a lot of renovations. The modifications later result in the house’s value increasing.
One of the spouses has a savings account that she opened prior to the union. She wants to buy a house with her husband when they get married. She uses funds from her separate savings account to cover the down payment on the marital house.
In order to invest in a small business that she and her spouse intend to start together, one of the wife sells stocks that she acquired before to the union.
A separate property can also inadvertently be commingled hence becoming marital property. In Wolcott v. Wolcott, unpublished judgment, COA Number 351918, just before the couple’s marriage, the wife received a gift of 10% of a family-owned firm. She worked for the company as well.
The couple kept separate bank accounts throughout the marriage, and the wife received payments from the corporation connected to her stock ownership that were put into a bank account that was entirely in her name. The trial court decided that the stock and the bank account belonged to the wife separately when the couple were divorced 16 years later.
However, on March 11, 2021, the Michigan Court of Appeals decided that the stock and bank account had been commingled and were marital assets due to two facts:
[1] The wife’s employment income, which is typically a marital asset, was deposited into the same account as her stock distributions; and
[2] The wife used distributions from the corporate stock, in addition to her other income, to pay marital expenses and household bills throughout the marriage.
Protecting Your Personal and Separate Assets
You may benefit from signing a prenuptial agreement before getting married if you are aware that you currently own or will inherit significant assets that you want to protect from divorce.
Prenuptial agreements give parties the chance to specify what will happen to their assets in the case of their passing or divorce, allocating distinct possessions to each spouse. They also specify rules for managing the household’s affairs. Prenuptial agreements’ capacity to shield assets upon divorce is no longer as unquestionably true as it once was due to recent changes in the way Michigan courts read them.
You must treat your separate property differently from the rest of your family’s finances and possessions in order to maintain their distinction. This could require:
[a] Keeping an inherited fund in a separate bank account.
[a] Keeping your residence and vehicle in your name only.
[c] Refraining from making repairs or upgrades to inherited property with marital funds.
[d] Refusing your spouse’s assistance in running the family business or maintaining inherited property.
[e] Maintain accurate property records to establish your personal asset is a separate piece of property.
[f] Refrain from adding your spouse’s name to the certificate of title of your separate property.
[g] Ensure the payment of taxes of real estate properties and earnings from these properties are drawn from sources under your name or are coming from sources attributed to your personal account or from checking accounts with your name. If possible get the cash from earnings of gifted or inherited property to pay for the income taxes for earnings from these separate properties.
The Wolcott decision shows that an asset must be maintained totally distinct to support a party’s claim of separate ownership of an asset, even though it was unpublished and is therefore not a binding precedent.
In that specific case, the Court of Appeals most likely would have determined that the stock and the bank account into which stock distributions were deposited were the wife’s separate assets if the wife had maintained a second, separate account into which she had deposited her paychecks and from which she had paid the marital expenses and household bills.
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