Marital Property in Michigan

by Nina Dodge Abrams
Abrams, Yu and Associates, P.C.

I. INTRODUCTION

Property division in Michigan is based on an equitable division of marital assets. The courts still look to marital property versus separate property. Generally, neither party is inherently entitled to a greater share of the marital assets or an unequal division of the marital debts. Separate property is often awarded to the owner spouse. While Michigan is a no-fault state in terms of getting a divorce, fault is one of the factors to be considered in a property division. 

II. STATUTES

A Judgment of Divorce, separate maintenance, or annulment must address the following interests:

a. Michigan Compiled Laws (MCL) 552.19. Restore real and personal property to either party as is just and reasonable.

b. MCL 552.23. Award real and personal property of one party to the other in gross or otherwise as the court considers just and reasonable, for the suitable support and maintenance of either party and any children of the marriage.

c. MCL 552.101 (1). Award the wife property in lieu of her dower claim in full satisfaction of all claims that she may have in any real property which the husband owns or may own in the future, or in which he may have an interest.

d. MCL 552.101 (2 – 4). Include provisions determining all rights to proceeds of life insurance, endowments, or annuities of the parties, as well as rights to any pension, annuity, or retirement benefits or contributions of the parties.

e. MCL 552.102. Provide that realty held in joint name after the divorce is held as tenants in common. Award realty to one party or the other, or order it sold and determine how the proceeds are to be distributed.

f. MCL. 552.401. Award separate property (either real or personal) of one spouse to the other if it appears equitable under the circumstances of the case or the party contributes to the acquisition, improvement, or accumulation of the property.

g. MCL 552.22. Require the disclosure of property interests under oath.

III. MICHIGAN COURT RULES

The Michigan Court Rules (MCR) govern practice and procedure in all courts established by the constitution and laws of the State of Michigan. Those rules which are applicable only to a specific court or only to a specific proceeding apply only to that court or to that type of proceeding and control over general rules.
 
Michigan has a Family Court which is part of the Civil Division of the Circuit Court. General Provisions, Chapter 1, and Civil Procedure, Chapter 2, are applicable to Family Court actions, as well as Subchapter 3.200 (Domestic Relations Actions), Subchapter 3.700 (Personal Protection Proceedings), and Subchapter 3.9 (Proceedings Involving Juveniles).

IV. CASE LAW

The standard for dividing or distributing marital property in Michigan is found in Sparks v. Sparks, 440 Mich. 141, 485 N.W. 2d 893 (1992). The court must use its discretion to divide property equitably under all circumstances.  While there is no rigid formula, the court is to consider the marital estate, the age of the parties, the lifestyle and status of the partners, past relations and conduct of the parties, and general principals of equity. Not all of these factors may be relevant to a particular case; nor are the factors to be given equal weight. The trial court has broad discretion to fashion property settlements that are fair under all the circumstances. On appeal, the court’s disposition will not be overturned unless the appellate court is left with a firm impression that the distribution was inequitable.

Valuation of assets is separate from selecting which assets to include in the marital estate. The court may value an asset as of the date of trial, the date of judgment, or a more appropriate date. Byington v. Byington, 224 Mich. App. 103, 114 n4, 568 N.W.2d 141 (1997). The Court must hear the evidence and is required to make an independent determination of the value of each asset unless the parties stipulate to its value. Olson v. Olson, 256 Mich. App. 619, 671 N.W.2d 464 (1989). The Michigan Rules of Evidence, particularly MRE 703, make taking testimony from experts particularly cumbersome and technical. Before the expert can offer an opinion, all the underlying facts upon which the expert relies to form the opinion must be in evidence.

In looking at property interests, the court must consider antenuptial agreements, settlement agreements, and postnuptial agreements. These contracts between persons contemplating marriage or resolving issues prior to divorce vary or relinquish rights that parties would have otherwise acquired in each other’s property through marriage. These rights may be waived by a written contract, an agreement, or a waiver signed after full disclosure, MCL 700.2205. To be enforceable, an antenuptial or postnuptial agreement must be in writing and signed by the parties; entered into voluntarily without fraud, mistake, or duress; agreed upon after full disclosure of assets or debts; and must be fair and not unconscionable when executed. Furthermore, the circumstances must not have changed so much by the time of enforcement that its later enforcement would be unconscionable. Rinvelt v. Rinvelt, 190 Mich. App. 372, 475 N.W.2d 478 (1991).

A property settlement agreement must either be in writing signed by the parties or placed on the record and generally approved by the court. Settlement agreements are governed by the rules of contracts; the main issue is to ascertain the intention of the parties. The court is generally bound by the property settlement agreement presented to the court unless the court makes a finding of fraud, duress, mutual mistake, or severe stress preventing a party from a reasonable understanding of the agreement. It must be entered into freely and voluntarily and with full knowledge of the consequences regardless of whether the settlement is equitable. Keyser v. Keyser, 182 Mich. App. 268, 451 N.W.2d 587 (1990). Courts should uphold the validity of a property settlement reached through negotiation and agreement absent fraud, duress, or mutual mistake. Kline v. Kline, 92 Mich. App. 62, 284 N.W.2d 488 (1979).

The court looks at property as marital or separate assets. Byington v. Byington, 224 Mich. 103, 568 N.W.2d 141 (1997); Reeves v. Reeves, 226 Mich. App. 490, 575 N.W.2d 1 (1997). Assets that are accumulated during a period of cohabitation before the marriage are not marital property. Marital property is that property accumulated through the joint efforts of the parties during the marriage. Leverich v. Leverich, 340 Mich. 133, 64 N.W.2d 567 (1954). It includes any assets earned up to the date of judgment (even if received after judgment). Byington, supra.

Marital assets also include any increase in net worth of separate property that may have occurred between the beginning and the end of the marriage. Bone v. Bone, 148 Mich. App. 834, 385 N.W.2d 706 (1986). However, an increase in value occurring during the marriage must reflect active involvement by one of the spouses, rather than being purely passive appreciation. The latter is an increase due solely to inflation, market appreciation, or accumulation of interest. Reeves v. Reeves, 226 Mich. App. 490, 575 N.W.2d 1 (1997).

Property designated as separate property is not divisible upon divorce absent special circumstances.  Separate property includes premarital property, assets gifted to or inherited by one party during marriage, and pain and suffering awards. Before the court may invade a party’s separate estate, it must specifically find that one of two statutory exceptions exists: one, that the claimant spouse contributed to the “acquisition, improvement or accumulation of the property,” MCL 552.401; or two, that the award to the claimant spouse from the marital assets is “insufficient for the suitable support and maintenance of the claimant and any children in his or her care.” MCL 552.23.

Where a spouse attempts to conceal assets, it is an abuse of discretion for the trial court to not take some sort of punitive action. Sands v. Sands, 192 Mich. App. 698, 482 N.W.2d 203 (1992) aff’d 442 Mich. 30, 497 N.W.2d 493 (1993). The court must look to the intentions of the parties regarding the property if there are claims of wrongdoing. Donahue v. Donahue, 134 Mich. App. 696, 352 N.W.2d 705 (1984). Full disclosure of all assets, earnings, and debts is required by the courts in Michigan, or the party hiding assets will be subject to punitive action by the court.

V. SPECIAL ASSETS

Retirement accounts are considered part of the marital estate and should be divided as part of the property settlement. Magee v. Magee, 218 Mich. App. 158, 553 N.W.2d 363 (1996). It does not matter whether the accounts or pensions are vested or unvested and whether they accrued before, during, or even after a divorce. Booth v. Booth, 194 Mich. App. 284, 486 N.W.2d 116 (1992). Qualified retirement and savings plans, under ERISA, are divided by Qualified Domestic Relations Orders; State of Michigan retirement plans and other governmental plans are divided by Eligible Domestic Relations Orders.
 
Stock distribution plans and stock option plans are divisible marital property. Everett v. Everett, 195 Mich. App. 50, 489 N.W.2d 111 (1992). Even unvested rights and immature rights are divisible. Vollmer v. Vollmer, 187 Mich. App. 688, 468 N.W.2d 236 (1990). Usually, there are different valuation and allocation problems to be resolved. 

Professional degrees or professional licenses acquired during the marriage are not marital property subject to division. The non-acquiring spouse who contributed to the acquisition of the degree or license as part of a "concerted family effort" has an equitable claim for compensation for his or her disproportionate sacrifices, efforts, and contributions. Postema v. Postema, 189 Mich. App. 89, 471 N.W.2d 912 (1991). Nevertheless, the court may consider any resulting increased earning capacity as part of an award of spousal support. Lesko v. Lesko, 184 Mich. App. 395, 457 N.W.2d 695 (1990).

Other divisible property includes earnings, replacement for earnings, worker's compensation awards, Social Security disability awards, damage awards in tort lawsuits, vacation and sick time, and dependency tax exemptions.

VI. DEBTS

There is little case law on the division of debts, but they are part of a property settlement and must be divided as negative assets. Regular household debts incurred during the marriage are generally assumed to be joint debts regardless of who signed any particular credit card slip or loan agreement. If a debt was plainly incurred for separate purposes and not for the good of the household without the express or implied consent of the non-debtor spouse, it may be considered a party's separate debt. Parties can be ordered to assume any debts that go along with specific property awarded to them. “Property Division,” Michigan Family Law Benchbook, prepared for The State Court Administrative Office, A Division of the Michigan Supreme Court by The Institute of Continuing Legal Education, Ann Arbor, Michigan, 2004 Supplement.

A divorce court does not have jurisdiction to adjudicate disputed debts owed to a third person or to compel a party to convey property to a third person. Hoffman v. Hoffman, 125 Mich. App. 488, 336 N.W.2d 34 (1983). Thus, although a court may allocate debts (even disputed debts) between the parties, it may not compel one of them to pay the debt to a third party.