You might be asking how to prove how to prove separate property in divorce. Dividing assets during a divorce follows an equitable distribution approach, meaning property is divided fairly but not necessarily equally. In some cases, this means an equal or 50/50 share of the assets and debts. However, if there is pre-marital or other non-marital property, the equitable split may be far from 50/50.
Separate property includes assets owned before marriage, inheritances, gifts, and compensation for pain and suffering in a personal injury settlement. Property considered spouse separate property remains with the original owner, provided it has not been commingled with marital assets. Maintaining documentation is essential to proving ownership.
The key is to note that the Court only divides the “marital” property of the parties. If one party has pre-marital or other non-marital assets or debts, the Court may not include this property when dividing a fair share of the marital property. This post serves as a guide on how to handle and prove non-marital property in a divorce.
How to Prove Non-Marital Property in Divorce
What is Separate or Non-Marital Property?
Each state follows either community property or equitable distribution laws. In community property states, most assets acquired during the marriage are divided equally. In contrast, equitable distribution states consider factors like financial contributions and the length of the marriage.
Your assets and debts prior to the marriage are generally your separate property. This is generally called pre-marital property. If you owned your home prior to the marriage, then the home (or at least the value at the time of the marriage) is likely your pre-marital property.
Assets and debts acquired during the marriage, but not by marital efforts, are also non-marital property. For example, if you receive an inheritance during the marriage, then the inheritance is likely your non-marital property.
The key difference between the types is that pre-marital property was acquired prior to the marriage but can be due to marital efforts. Other types of non-marital property are acquired during the marriage but aren’t due to marital efforts. Pre-marital property is just one type of non-marital property.
Prenuptial Contracts
One way to protect non-marital assets, and especially pre-marital assets, is to detail them in writing and disclose them to the other spouse prior to the marriage. Including the details as to what each party has at the time of entry into the marriage and an agreement as to their values makes it easier to determine the pre-marital assets and their values if the parties later divorce. This agreement can be included in what is known as a prenuptial contract or prenuptial agreement. A prenuptial agreement is often convincing evidence to show what property is separate and the value of the separate property.
It is important to note that prenuptial agreements generally have strict rules to follow to be enforceable. Because of this, the spouses generally each need an attorney to review their assets and to draft the agreement to ensure the prenuptial agreement holds up if they ever land in divorce court. A judge presiding over the divorce case may set aside or ignore the prenuptial agreement if the requirements are not met. For example, a prenuptial agreement could be found unenforceable if:
- The agreement is deemed unconscionable (beyond being fair)
- Signed under duress
- Coercion
The prenuptial contract may also become invalid if it contains inaccurate or incomplete information. If there was not a full disclosure of assets or values, or if the disclosure was misleading, the Court may find that the Court cannot enforce the prenuptial agreement.
Keep in mind that in some situations, a post-nuptial agreement may also be allowed. This is an agreement that is entered into by the spouses during the marriage, but is only allowed in very limited circumstances in some states.
Pre-Marital Property – Protecting Pre-Marital Property Without a Prenuptial Agreement
Typically, the spouse’s individual property owned before the marriage remains as separate property and is not available for distribution during the divorce. However, for the assets to be considered separate property, the property must stay separate from the marital assets. If not, the other party’s attorney could argue they are marital assets due to comingling.
Many people are unaware there is a requirement to keep assets separate in order to protect pre-marital assets. Often assets that could have been considered pre-marital have been comingled to the extent that the Court now considers the property as marital and divides a share with the other spouse.
Other Non-Marital Property
Most assets acquired during a marriage qualify as marital assets. However, there are situations where they may qualify as separate or non-marital property. Here are a few examples of these cases.
- Property obtained during the marriage through gift from someone other than your spouse. For example, your parents gift you funds that you keep in a separate account in just your name.
- Personal Injury Settlement. For example, the funds received in a personal injury settlement for future medical needs and care. (However, the part to replace lost wages during the marriage may be marital).
- Property acquired from non-marital property. For example, if you receive an inheritance and purchase a vehicle that you title in your own name.
- An increase in value of the separate property unrelated to efforts or contributions during the marriage. For example, the increase in value of an inheritance that is kept in an index fund and increases in value over time.
A Mix of Non-Marital and Marital Property
Some property is a mixture of both non-marital and marital property. In these cases, only the marital value of the property is shared between the parties. The value of the non-marital property is awarded solely to one spouse.
Retirement Accounts and Separate Property
A common example is a retirement account that had contributions both prior to the marriage and during the marriage. So long as the pre-marital contributions are “traceable,” only the value of the account acquired during the marriage is marital property.
For example, Wife has already contributed $50,000 to her 401K through her employer at the time the parties marry. She continues to make monthly contributions to her 401K during the marriage. The parties file a divorce action. The Wife’s 401K is now worth $60,000. The parties agree that the marital portion of the 401K is $10,000. Only the value of $10,000 goes on the balance sheet when determining the marital assets and debts. The remaining $50,000 is awarded to wife as her separate property. (Note: This is only one method of determining the value and is simplified for illustrative purposes. In an actual case, the parties might do tracing to determine the increased value due to the original $50,000’s appreciation over time and might consider that a 401K is a pre-tax asset).
Real Estate and Marital Equity
Another common example occurs when one party owns the marital home prior to the marriage. For example, Wife owns the home at the time of the marriage. At the time of the marriage, the equity in the home is $50,000 as the home is worth $350,000 and the mortgage is $300,000. The parties are married for 5 years and make some improvements to the home. Wife continues to pay the mortgage on the home using the marital funds she earns during the marriage. The title and mortgage remain solely in the Wife’s name.
At the time of the divorce, the marital equity in the home is now $100,000. In this situation, the parties might agree that the marital equity is $50,000. Husband is awarded $25,000 of the equity in the home (half of $50,000) and Wife is awarded $75,000 of the equity in the home due to $50,000 of the equity being a pre-marital asset. Again, this is for illustrative purposes only, and is not the only way to resolve this issue.
Converting Non-Marital Assets into Marital Assets – Comingling Assets
Non-marital property can become a shared or marital asset if co-mingled with marital assets.
For example, you receive an inheritance of $12,000. You use the money to pay off both spouse’s credit cards from debt acquired during the marriage. The parties file a divorce one year later and have no credit card debt. In this situation, the spouse who had the inheritance isn’t likely to be awarded $12,000 of the property as separate property. The Court would likely say the funds were comingled and became marital property when used to pay off marital debt. There may be an argument here, but the odds favor the Court finding that it has been co-mingled.
Another example, but using pre-marital property: Husband owns his vehicle at the time he marries. The vehicle was already paid in full on the date of the wedding. Over the years, the vehicle becomes the wife’s primary vehicle and later their teenage son’s. Husband files for a divorce 20 years later. In this situation, the Court may likely say that the vehicle has been a marital asset for too long. The property has been comingled and has not been separate property of the husband for many years. The Court doesn’t assign any separate property value to the vehicle and its value is added to the balance sheet with the other martial assets.
As you can see, the analysis of whether property has been co-mingled or not can be very fact dependent.
Protecting Non-Marital Property – Strategies Other than a Pre-Nuptial Agreement
Most people do not have a pre-nuptial agreement. However, non-marital property is common in a divorce action and can be protected without a pre-nuptial agreement.
Keeping bank accounts and financial records separate prevents confusion between separate or marital property. A clear financial trail is necessary when proving an asset was not earned during the marriage. This include:
- Keeping detailed records of mortgage payments, renovations, and financial contributions related to separate property.
- Maintaining separate accounts for inheritances and gifts to prevent comingling.
- Avoiding adding a spouse’s name to property deeds or financial accounts unless intended to share ownership.
Money inherited should be kept in a separate account and not mixed with other funds. Depositing the funds into a shared account often qualifies as co-mingling, resulting in it now qualifying as a marital asset.
Don’t add your spouse’s name to pre-marital investments or bank accounts as a signatory or co-account holder. This action can assume the intention was to share the account or investment, making it qualify as a marital asset for divorce distribution purposes.
Don’t add your spouse’s name to the title of pre-marital property. If you owned the home prior to the marriage, don’t add your spouse’s name to the title or mortgage. Keep in mind that if the home is not paid in full at the time of the marriage and the parties resided in the home during the marriage, then there is likely going to be a finding of some marital property value for the months the mortgage was paid during the marriage, no matter what spouse did the logistics of paying the mortgage during the marriage.
Separate Property v. Marital Assets
Before entering into a marriage, it’s often advisable to consult with a knowledgeable attorney with experience in dividing and distributing property during divorce proceedings. It is the burden on the party claiming the asset is separate property to prove it.
Prudent planning and/or a prenuptial agreement can go a long way to protect pre-marital or other non-marital property in case the parties ever divorce. Leaving it to chance could result in surprise or greater disagreements if the marriage ends and the parties were unaware of the effects of their decisions.
Impact of Property Improvements on the Marital Estate
In divorce, improvements made to real estate or personal property during the marriage can complicate asset division. If marital funds were used to enhance property like a marital home or vacation homes, the increased value may be considered part of the marital estate.
Key points to consider:
- Real estate improvements, like renovations or extensions, could increase property value, making it eligible for division.
- Marital funds used for property improvements need to be documented as they may affect the marital balance.
- Spouse acquired improvements, such as adding a pool or updating a kitchen, may also be included in the division if marital resources were involved.
Courts often assess how marital funds impacted the property’s value before finalizing property and debts division. Properly documenting these improvements ensures a fair division of the marital estate.
Speak to An Attorney in Omaha
In a divorce, the division of property and the standards for proving property as non-marital can be confusing. Individuals are often unaware of the laws and rules qualifying marital or separate property. They should consult with an experienced and knowledgeable divorce attorney in Omaha. Knowledge and planning can help minimize problems down the road.
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