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When Can Separately Owned Assets Be Part of Equitable Distribution?

In many divorce cases, one of the major issues is how assets will be divided between the spouses — a process known as equitable distribution. There are two types of property to be considered in this regard: separate and marital. Separate property is any asset that one spouse owned prior to the marriage or acquired by gift or inheritance at any time. Marital property is any other asset acquired during the marriage. In a divorce, each spouse generally keeps their separate property. However, in certain situations, the court will divide some of the separate property in the interests of fairness.

In Michigan, a state statute permits family courts to award either spouse an interest in separate property during a divorce. This division often occurs when the non-owner spouse has substantially contributed to acquiring, enhancing or adding value to a separate asset. By way of example, suppose that one spouse owned a home prior to the marriage but the other spouse used savings he or she accumulated prior to the marriage to make substantial renovations to the home. In this case, the enhancement in value of the home would likely be equitably divided between spouses. Another example is where one spouse invests his or her separate assets in a business started by the other spouse before the marriage. If the contributions of the investing spouse substantially improved the success or growth of the business, then the court might award both spouses a share of the increased value.

A decision on dividing separate property is fact-specific. The courts do not ordinarily divide all separate assets that grow or gain value during a marriage. The non-owner spouse must have actively contributed to an asset’s enhancement. That is, the spouse must have contributed his or her own money or labor in a way that helped increase the value of the asset. If a separately held asset passively increases in value, then the non-owner spouse would generally not be given a share of that asset. One should consult a qualified divorce attorney for guidance on a particular matter.

The family court will sometimes divide separate property out of financial necessity. If an equitable division of all marital property would leave one spouse unable to meet their basic expenses, the court may award that spouse a share of the other spouse’s separate property. The court must balance allowing people to keep their separate property while ensuring that the other spouse is not left in a state of financial distress.

Based in Sterling Heights, Dawson Family Law, PLLC is one of Michigan’s most highly regarded divorce and domestic relations law firm. We work diligently with the goal of each client achieving the best possible results from equitable distribution. If you have a divorce or other family domestic relations matter, feel free to contact us or call 833-671-4445 for an initial consultation.

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