If you came into your marriage with substantial assets or property interests, you want to walk away from your divorce with those assets intact. Understanding what you need to do in proving separate property in Michigan courts, even long before the divorce process starts, can go a long way to protecting your home, inheritance or business interests at trial.
What Does an Equitable Property Division Mean?
Michigan is what is called an “equitable property division” state. When a couple gets a divorce, the Michigan Family Court judge can enter a judgment of divorce that divides the couple's marital property in a way that is fair and equitable to both parties, based on the circumstances in the case. This doesn't always have to be a 50/50 split, but any tipping of the scales must be explained.
But not everything the parties own is considered “marital property.” Instead, Michigan courts generally divide any property “that shall have come to either party by reason of the marriage.” This includes property (including income) that either party has earned or accumulated from the date of the marriage to the date of the divorce. But there are exceptions, called “separate property.”
What Counts as Separate Property in Michigan?
Michigan recognizes several different types of separate property:
- Anything owned by one party prior to the marriage
- Inheritances received by one party only
- Gifts given to one party only
- Personal injury awards for pain and suffering (but not lost wages or other compensation)
- Veteran's disability benefits (according to federal law)
The common thread is that all these assets are individually held by one spouse separate from the combined efforts of the household.
Proving Separate Property is Still Separate
If you want the Court to award you any assets as “separate property,” it is up to you and your Michigan divorce lawyer to prove that the property fits into one of the separate property categories, and that it remained solely yours throughout the marriage. Proving separate property interests goes beyond showing how these assets were obtained or titled. You will also need to show that the property remained separate from marital funds, was not used for marital purposes, and was not “commingled” with other shared assets.
If, for example, you used a personal injury settlement to purchase a new home for you and your spouse to live in, a judge could determine that you “commingled” the separate property award when you converted it into the house. You will not be able to receive a credit for your separate interest unless you can prove the part that should remain separate property.
Tracing is a forensic accounting process that tracks the separate assets through various deposits and withdrawals in the parties' accounts. It usually requires a party to hire an expert and is most effective regarding financial, retirement, or investment account. “Tracing” a separate property interest in real estate or personal property is much harder, especially if that property was used as the marital home.
Tips to Protect Your Separate Property
The best way to prove separate property claims is to be proactive in treating them separately even before the marriage begins. To protect your interest in your separate property, you should:
- Execute a prenuptial agreement listing the assets as separate property
- Set up separate accounts used solely for those assets
- Avoid mixing separate and marital assets
- Keep careful accounting of withdrawals, deposits, or investments of separate property assets
- Negotiate a separation agreement or divorce settlement agreement that protects your assets
- Ensure that your spouse will receive a fair marital property award to support him or herself without dipping into separate funds
It may sound counter intuitive, but the best thing you can do to protect your separate property is to treat your spouse fairly when it comes to dividing up everything else. The more important a separate property asset is to you, the more you should work to avoid leaving property division up to the courts.
What Michigan's “Invasion Statutes” Mean for Your Separate Property
That is because, in Michigan, family court judges have the authority to “invade” separate property when equity demands it. That means even after you prove the asset is a protected type of separate property, the Court could still award a share of it to your spouse based on:
- Need if the other assets available to your spouse are not enough to support him or her
- Contribution if he or she actively assisted in accumulating or improving the asset
These two “invasion statutes” go back to the idea of “equitable property distribution.” They allow judges to reach into the separate property of one spouse to make sure the other is not impoverished or deprived of their fair share.
The most common example of contribution occurs when couples live together in one party's premarital home. Often, they use marital funds to pay off the mortgage and make improvements, and the non-owner spouse handles repairs, upkeep, or maintenance on the property during the marriage. At trial, the owner spouse will try to prove separate property claims based on their ownership of the property. However, Michigan law says that the non-owner spouse can still be entitled to an equitable share in the property's change in value during the marriage, or the time and effort they put toward the property. Being prepared to address these arguments is key to preserving your interest and making sure any property division is truly fair.
Get Help Protecting Your Separate Property from of a Michigan Family Lawyer
At Bebout, Potere, Cox & Bennion, P.C., we care about you and your family. We help individuals and families in Rochester Hills, Rochester, Troy, Lake Orion, Oxford, Oakland County, Macomb County and throughout Southeast Michigan. We can help you identify your marital and separate property assets and negotiate or advocate to shield the property most important to you. Call us at 248-651-4114 or contact us here to speak to an attorney.
