Unless you and your soon-to-be ex-spouse own absolutely no property together, division of property is an aspect of your divorce that you will eventually have to confront. Some couples address this issue before it ever arises by executing a premarital agreement or by reaching a mutual agreement on property division once a divorce petition is filed. However, if there is a disagreement over who should get which pieces of property or how much something is worth, a court will intervene and render a decision as to division and valuation. An outline of the law on property division in a divorce proceeding appears below so that those going through, or contemplating, divorce will know what to expect:
Basic Property Division Principle
Property division in Michigan is made on the basis of equity. This means a court will divide property in a divorce according to what it views to be the fairest manner as possible. While the starting point in most divorces is an equal division, the controlling factor is whether an equal division is fair. Some possible reasons for an unequal division include:
- The conduct of one party which directly led to the end of the marriage;
- One party accumulated more debt; and
- The earning capacity of one spouse is much greater than the other.
Further, both assets and liabilities acquired and/or incurred during the course of the marriage are divided between the parties. The court specifically looks at how much each spouse contributed to the “acquisition, improvement or accumulation” of property while married.
One of the most important determinations a court makes relative to property is what “marital property” is and what “separate property” is. Marital property is property acquired, or debt accumulated, during the course of the marriage. It does not matter whose name is listed as the owner on the contracts or bills of sale for these pieces; what matters is when the property was purchased. Anything acquired up until the entry of a final Judgment of Divorce can be labeled as marital property. Additionally, some property received after divorce could be considered marital as well, if the efforts needed to obtain the property occurred while the couple was still married.
Separate property is not divided in a divorce and includes any property owned by a party before the marriage began or property he or she received through inheritance or as a gift during the marriage. It is important to note that a separately-held piece of property’s increase in value could be considered a marital asset and subject to division if the property was treated as marital property or increased in value due to the active efforts of either spouse during the marriage. Thus, it is important not to commingle assets that you want to keep as separately-owned property.
The marital home is often the largest and most valuable asset owned by a couple, which makes decisions on its division highly sensitive. The division if often based on the equity in the home, or lack thereof.
Equity is the market value of the property minus any debts or liens against it. Market value is determined at the time of separation and is based on an appraisal from a real estate agent. The parties typically have three options to choose from to divide the property:
- Sell the house and divide the proceeds;
- One party keeps the house and refinances it to buy out the other party’s interest in it; or
- If the parties have young children, it is common for the custodial parent to retain possession of the home until a certain date and then buy out the other party or sell the property and split the proceeds with his or her former spouse.
Seek Legal Advice from a Michigan Divorce Attorney
Decisions about the division of property have long-lasting repercussions that directly affect the financial security of each party after a divorce and should be entered into with “eyes wide open”. Working with an experienced divorce lawyers on this issue will help to ensure your property is divided fairly. The law firm of Iafrate & Salassa, P.C., representing clients in Macomb County, understands the magnitude of this issue in a divorce case and is available to assist you. Contact them to schedule a free consultation.