Marital Versus Separate Property
When dividing property, the first thing courts need to determine is the character of the property, meaning whether property is “marital” or “separate.”
"Marital property" (the property that comprises the marital estate) may be divided between spouses in divorce. Generally, marital property is any property or assets, which were acquired or earned during the marriage. Common examples include homes, cars, furniture or furnishings, art, retirement accounts, pension plans, savings accounts, CDs, or any other assets or investments earned or acquired during the marriage.
Note that this includes assets earned by either spouse during the marriage, even if they aren’t received until after a judgment of divorce. For example, if you earn a bonus or commission while you’re married, the bonus will be considered marital property, even if you file for divorce (or are actually divorced) before the bonus or commission is paid out.
And, it doesn’t matter which spouse technically “earns” the asset. For example, if savings or retirement accounts are accumulated from only one spouse’s earnings during the marriage, they are still considered marital property, and will be divided between spouses during a divorce proceeding.
“Separate” property includes any property or asset obtained or earned before the marriage, or any property received through a gift or inheritance at any time. So, for example, if you inherit money from your parents during your marriage, that money remains your separate property, as long as you continue to keep it separate (eg., as long as you don’t comingle it by depositing it into your joint bank account(s)).
Sometimes, figuring out whether an asset is marital or separate can present complex legal or financial questions. If you're in a dispute with your spouse about the character of property, you should contact an experienced family law attorney that can help you figure it out.
Dividing Marital Property in a Divorce
There are two ways to divide marital property during a divorce. This first is to enter into an agreement with your spouse regarding who gets what. If you and your spouse can agree on a division that seems fair to both, you can then memorialize your agreement in a written contract, usually referred to as a “property settlement agreement” or “divorce settlement.” Then, you can ask a judge to include your agreement in the final judgment of divorce. Even if you and your spouse agree on everything, you may want to contact an attorney that can help you draft an enforceable agreement and make sure your rights are fully protected.
If you and your spouse can’t come to an agreement on how to divide marital property, you’ll end up in court, and a judge will decide for you.
The court's division must be fair, but not necessarily equal
Michigan is not a community property state, so marital property is divided equitably, but not necessarily equally. Michigan divorce courts must strive for a “fair and equitable” division of marital property and of any increases in marital assets that may have occurred between the beginning and end of the marriage. For example, if a couple purchased a $100,000 home that is worth $300,000 at the time of the divorce, the court will seek to fairly distribute the current, increased value of the home.
The final result should be a fair and equitable distribution under all of the circumstances. Courts are not required to follow any rigid rules or mathematical formulas, but instead, must embark on a consideration of the entire case.
Courts should consider the following factors when distributing marital assets:
- the length of the marriage
- the spouses’ contributions to the marital estate
- the spouses’ ages and health
- the life status of the spouses
- the spouses' necessities, financial needs, and circumstances
- the earning abilities of the spouses (meaning how much income each spouse could earn based on education, job skills, work history, and employment opportunities)
- the spouses’ past relations and conduct, and
- general principles of equity (fairness).
There will be many cases where some of the above factors will be irrelevant, and additional factors may be more appropriate for a particular case. For example, the court may choose to consider the interruption of one spouse’s personal career or education to provide full-time care to the child(ren) of the marriage. Courts need to determine which factors are most relevant and this will vary depending on the facts and circumstances of each case.
Further, while courts may consider the cause of the divorce or marital misconduct when establishing the division of property, it is only one of several relevant factors that the court must consider in order to reach a fair division.
Debts Should be Divided
Divorcing couples must also deal with their debts. Regular household debts (eg., for a home, car, credit card bills, and medical expenses) incurred during the marriage are generally considered to be joint debts, and both spouses will be liable for repayment. You and your spouse can agree how to divide debts in your divorce agreement, or if you can't agree, a judge will decide. Courts have authority to order that debts will follow the property each spouse is awarded. For example, if one spouse is going to keep the family home, he or she will probably have to buy-out the other spouse's interest, and will assume the remaining debt on the home going forward.
Sometimes, during marriage, spouses incur debts for separate purposes: not for the benefit of the marriage and without spousal consent. For example, one spouse may rack up a huge credit card bill on gifts for a lover or other "friend." Under these circumstances, a court may order that the cheating spouse is solely resonsible for the credit card debt.