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Getting divorced? Make sure you inventory the marital estate

A divorce requires the parties to divide the marital estate. In Michigan, that approach is called equitable distribution, calling for a fair result, but not necessarily a 50-50 split. Although disputes may arise over what constitutes “fair,” our law firm has also found that misconceptions still exist over the predicate issue of what constitutes marital property.

Specifically, many clients incorrectly assume that a 401(k) retirement plan is strictly their property. Although the plan may be associated with only one individual’s employment, contributions alone do not determine whether an asset is part of the marital estate. Similarly, the name or tile on property acquired during the marriage may also be misleading.

Courts draw a bright line after a marriage goes into effect, with every dollar earned or asset purchased deemed part of the marital estate. Technicalities, like title designations, generally do not defeat that functional approach to marital estate classification. However, there are exceptions.

For example, inheritances are generally considered separate from the marital estate. However, a spouse that inherits money or assets should take care not to commingle that inheritance with the marital estate. Our law firm recommends setting up a separate bank account for inheritances, as well as any previously owned assets. Otherwise, any improvements to those assets, including interest, could be imputed to the marital estate.

Similarly, any debts acquired during the marriage are generally presumed to be the joint obligation of both spouses, unless one spouse is able to qualify for the legal exception of innocent spouse relief. Since many divorces require an accounting of the marital estate, keeping good records can be a proactive step to take before meeting with an experienced divorce attorney.

Source: FindLaw, “Inheritance and Divorce,” copyright 2017, Thomson Reuters

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