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Is Income From Separately Owned Property Considered Marital Property in a Michigan Divorce?

When ruling on property distribution during a divorce, Michigan courts must decide whether given assets are “marital” or “separate” in nature. Marital property is divided up as the court determines to be “equitable” based on a number of factors, With few exceptions, all property or income acquired by the spouses from their wedding day up to the final divorce judgment is deemed to be marital property and thus subject to equitable distribution. Generally, assets that one spouse already owned before the wedding are not considered in the calculation. Neither is property that one spouse received during the marriage by gift or inheritance.

A wrinkle in the analysis concerns income or appreciation derived from separately owned property during the marriage. Under Michigan law, these amounts may or may not be considered marital property, depending, in part, on the efforts that went into producing them. If one spouse contributes to the “acquisition, improvement, or accumulation” of the other spouse’s property, all or part of that property can be divided up in the divorce. So, if you own a house separately but your spouse played a role in refinancing or managing rentals or took other actions that brought value to the property, the resulting income and increase in value may be considered marital assets. However, if you owned property separately and it gained value on its own or through your efforts alone — such as your interest in a business — your spouse may not be entitled to a share unless he or she can demonstrate corresponding contributions that made your efforts possible. These may include caring for the children and giving up a career.

Separate property is subject to being reallocated in whole or in part if equitable distribution of marital property alone would leave one spouse with assets “insufficient for the suitable support and maintenance” of that spouse and any shared children in his or her care. So if you independently own the house that you lived in with your spouse and children, the court may require a sale of the house to allow a share of the proceeds to go to your spouse.

Even if you hold property in your name, there must be careful analysis given to income and increases in value to determine if they may be subject to equitable distribution. At Dawson Family Law, PLLC, I have more than 40 years of family law practice experience, helping clients throughout Michigan achieve fair property settlements during divorce. To schedule a free initial consultation, call my Sterling Heights office at 833-671-4445 or contact me online.

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