Separate, Marital, Hybrid: Defining and Dividing Property After Divorce
When a marriage ends, who decides which spouse gets what property? If a former couple cannot reach an agreement, either party can ask a circuit court judge to make the decision for them. After decreeing a divorce, the Court may also rule on how to split the couple’s property between them in a process called “equitable distribution.” The term “equitable” does not mean “equal.” The Court will divide the property in a manner it deems fair, but not necessarily right down the middle. This article explains one of the issues the court will address before making an equitable distribution award.
Defining the Property
Before splitting the property, a judge must first assign each property a label as either “marital” or “separate.” Courts assume that property acquired after the separation is separate. It is possible to acquire separate property during the marriage, by selling or gaining income from separate property. Gifts or inheritances you received from someone other than your spouse during the marriage are also separate. “Separate property” belongs to an individual spouse.
“Marital property” is shared between the couple. These assets are acquired during the marriage or titled in both spouses’ names. Separate property can become marital property if its owner commingles the asset with marital property to such an extent that it’s no longer possible to tell the assets apart. A common example of this commingling is a bank account opened to the other spouse such that both are contributing income and withdrawing expenses at will). Any asset earned before the separation date is presumed to be marital property. A spouse who wants to claim it as his or her own separate property must put on evidence, such as proof that the asset was a gift to them alone. Otherwise courts treat all assets as fruits of the labor of the parties to the marriage.
Separating Hybrid Property
Hybrid property can occur when separate assets are contributed to a marital asset. The property can be difficult to divide if it appreciates prior to the distribution. The Court does not have to use a particular formula to calculate the separate/marital proportions of the property. However, many judges prefer a common formula known as the Brandenburg formula. The name comes from the parties in the case that first adopted the formula. The formula relies on three important values: the present equity in the case, the marital contributions toward that equity, and any contribution toward that equity that a party can show came from separate property. The Court uses proportions of these contributions to the equity to assign value from the property to each spouse.
Consider this example: A married couple purchases a home valued at $100,000. For down payment, the wife contributes her savings account from when she was single. Her contribution is $20,000. Over the course of the marriage, the couple pay down the mortgage by $30,000. The property also increases in value. It is now appraised at $150,000.
The equity in the property is now $100,000. The wife’s savings account is a nonmarital contribution of $20,000, or 20% of the interest in the current equity. The remaining 80% interest in the $100,00 equity comes from the marital contribution of $30,000 paid towards the mortgage and the $50,000 of appreciation that occurred during the course of the marriage. Applying the Brandenburg formula, the Court will treat 80% of the equity as marital property that can be divided between the spouses. The remaining 20% belongs to the wife, if she can trace it back to the money she paid from her premarital savings account.
What You Can Do
If you plan to ask the Court for equitable distribution, you need to have a proof of contributions to the marriage. Start by collecting your financial records now. Hire a conscientious attorney to help you organize the records for your case. Thorough preparation will ensure the best award for you. A fair distribution can help you move past the ended relationship.