Getting Divorced? Marital Property v Separate Property? How do you tell?

By Adil Daudi

… “For better or worse, for richer or poorer” … They always say it, but unfortunately it rarely happens. If you take a moment to think of all the people you know who in the last five years have gone through a divorce, I imagine you will be surprised by how high the number actually is. It is estimated that the average marriage in the United States lasts only 8.8 years, and the current divorce rate in the U.S. predicts that 1 out of 2 first-time marriages will end in divorce.  These are statistics that are concerning and scary, and if we believe that this trend doesn’t occur within our own community, then we are oblivious to what happens around us.

Because nobody plans for divorce, going through the process can be daunting and potentially costly.  Here is a non-exhaustive list of concerns most clients have:

•    What is the process for divorce cases?
•    Why/When will we be in court?
•    Do I have to talk at court?
•    What property will I get/give from the marriage?

The most common question posed during our initial consultations are the properties that are to be divided, and how/which ones can be split. Michigan law dictates that all marital property is to be equitably divided. This article will focus on some of the general factors that are considered to determine if the personal property (e.g. bank accounts, golf clubs, fine china, etc.) or real property (i.e. land) will be considered marital property or separate property for purposes of division of assets.  Please keep in mind that this article is only meant to serve as an introduction or overview; a comprehensive dissertation on this topic could fill volumes. Any detailed questions should be directed to an experienced family law attorney. 

General Rule for Marital Property v Separate Property

Generally, marital property is that which is acquired or earned during the marriage; separate property is that which is obtained or earned before the marriage.  MCL 552.19.  Therefore the Court’s first consideration when dividing property is the determination of marital and separate assets.  Byington v Byington, 224 Mich App 103, 114, n.4; 568 NW2d 141 (1997).  After such determination is made, the court may consider whether it is appropriate to “invade” the separate property of a spouse.

Some Exceptions to the General Rule

Generally, only the marital estate is divided between the parties, and each party takes away from the marriage that party’s own separate estate with no invasion by the other party.  Reeves v Reeves, 226 Mich App 490, 494 (1997). This rule of “non-invasion” has only two exceptions, both statutory.

1.    MCL 552.23(1): if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage who are committed to the care and custody of either party, the court may also award to either party the part of the real and personal estate of either party and spousal support out of the real and personal estate, to be paid to either party in gross or otherwise as the court considers just and reasonable, after considering the ability of either party to pay and the character and situation of the parties, and all the other circumstances of the case.

2.    MCL 552.401: The circuit court of this state may include in any decree of divorce or of separate maintenance entered in the circuit court appropriate provisions awarding to a party all or a portion of the property, either real or personal, owned by his or her spouse, as appears to the court to be equitable under all the circumstances of the case, if it appears from the evidence in the case that the party contributed to the acquisition, improvement, or accumulation of the property.

This statutory exception contemplates a two-part test. First, the trial court is to consider all of the relevant circumstances of the case. Next, the court is to determine whether the non-holding party contributed to the acquisition, improvement or accumulation of the separate estate.

Although divorce is never a foreseen plan, those involved should see it as an ending, but with a new beginning. The horror stories we hear of how “ugly” the divorce went does not always need to be the case. Working with the ex-spouse can have numerous benefits, including saving on costs. However, there should be no reason anyone, who has a right to a property, does not receive what they are legally entitled to by law. Working with an attorney can help alleviate many of the concerns you may have, that is why it is important and strongly recommended to meet with an experienced family law attorney to protect your rights.

Adil Daudi is an Attorney at JKY Legal Group, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Shariah Estate Planning, Health Care Law, Business Litigation, and Corporate Formations. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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