No. Michigan divides marital property using the theory of “equitable distribution”. Community property states attempt to distribute property as close to a 50-50 split as possible. Equitable distribution states divide property based on a determination of what’s fair under the circumstances of each case.
To find out more about the difference between equitable distribution states and community property states, see the article “Property Division by State.”
Michigan divorce laws regarding division of assets classify property as either “marital” or “separate”. Generally, marital property is subject to distribution while separate property isn’t. When dividing property, the first thing courts need to determine is which one of those categories property items fall into.
"Marital property" (the property that comprises the marital estate) usually consists of assets which were acquired or earned during the marriage. Common examples include homes, cars, furniture or furnishings, art, retirement accounts (like 401k’s), pension plans, businesses, and bank accounts.
Be aware 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. Let’s say a savings or retirement account is attributable to only one spouse’s earnings during the marriage. The law still considers that account to be marital property.
“Separate property" includes any asset obtained or earned before the marriage, or any property received through a gift or inheritance at any time.
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 to help you figure it out.
In order to properly effectuate a fair and equitable distribution of property, the court needs to know how much the property is worth. With some assets that’s relatively easy, such as a bank account. With others, you’ll probably need to use an expert, like a real estate or business appraiser.
Assessing retirement accounts can be especially tricky if they’re being divided prior to their pay-out period. In those situations, you'll need to determine the account’s current value, which will likely require the services of an actuary.
In making a decision on property distribution, a judge will consider certain factors, as follows:
Not all of those factors will apply to every case. For example, in a divorce where neither spouse is accusing the other of wrongdoing, spousal conduct probably wouldn’t be relevant.
After deciding which of the factors apply to a case, and reviewing the couple’s circumstances, the judge will determine the fairest allocation of the marital estate, and the best method of bringing that about.
Dividing the marital home can be problematic. The easiest way to deal with the issue is for the couple to agree to sell the property and divide the proceeds. If only one spouse wants to take that route, that spouse will have to ask the judge to order it. However, there’s no guarantee the judge will do that.
The presence of minor children can also complicate the situation. Often, the spouse who has primary residential custody of the children will want to stay in the marital home, so as not to uproot the kids. There are a number of ways to handle this. If there are enough joint assets available, the spouse who wants to remain in the house can buy out the other spouse’s interest. In other words, one spouse keeps the house, and the other gets to keep more of the other assets to balance things out. Another way for a spouse to buy out the other’s interest is to refinance the home if feasible, and use the proceeds of the refinance to pay the other spouse.
An option that is fairly common is for the couple to agree to keep the house in both names while one of them resides there, but only until a certain date, such as when the youngest child enters or completes college. At that point the house will be sold and the couple divides the proceeds. In the interim, the spouse who’s occupying the home typically is responsible for paying the costs associated with living there.
If the couple can’t agree on what to do with the home, the judge will decide, again based on an assessment of what’s most fair to all involved.
As indicated above, separate property isn’t usually subject to equitable distribution. For example, if you inherit money from your parents during your marriage, that money remains your separate property. The same holds true for a gift, and for property you brought into the marriage. But there are exceptions to this rule.
One exception arises when spouses commingle their separate property with marital property. So, if you get money from an inheritance or a gift, and you deposit it in a joint bank account where money is going in and out during the marriage, it's likely a court will find that everything in that account is marital property.
Another exception arises if the other spouse contributes to the separate property at some point. In that scenario, the contributing spouse may be entitled to a portion of that asset. Let’s say a spouse owned a house prior to the marriage, and never transferred an interest in the house to the other spouse. But during the marriage, the couple mutually paid for improvements made to the house. The non-owner spouse may then be entitled to a percentage of the increase in the house’s value attributable to the improvements.
Additionally, unlike some other states, Michigan gives its judges the authority to distribute separate property if they determine that dipping into a separate asset is necessary to meet the needs of the non-owner spouse.
Dividing debt is part of the equitable distribution process. Debts that a spouse incurred prior to marriage, such as a student loan perhaps, are considered separate debt, and will usually remain that spouse’s responsibility. But regular household debts acquired during the marriage are generally seen as joint obligations, and both spouses will be liable for repayment. (Think in terms of a home mortgage, auto loans, credit card bills, and medical expenses.) Note that debt associated with a particular asset will normally be the obligation of the spouse who receives that asset in the divorce, such as a mortgage on the marital home if a spouse receives sole ownership of that home. As with property, a judge will decide the fairest way to divide marital debt.
Be advised that a judge may determine that a debt incurred during the marriage isn’t a joint obligation. For example, one of the spouses accrued gambling debts during the marriage. Or a spouse ran up credit card expenses connected to an extramarital affair. In those cases, the court could find that the spouse who incurred the debt should be solely responsible for paying it off.
Also be mindful of the fact that creditors aren’t bound by your divorce judgment. If your spouse is supposed to be paying off a joint credit card, and misses payments, as far as the credit card company is concerned you’re still on the hook. You can look to the court to compel your ex-spouse to comply with the divorce terms, but in the meantime your credit rating could be adversely affected if you don’t step in to make the payments. Because of this potential pitfall, it’s a good idea to try to have as much marital debt as possible paid off from assets at the time of divorce. At the very least, keep tabs on payment of accounts your name may be on, but which your spouse is responsible for under the divorce. This can guard against your being blindsided down the road.
To the degree that you’re able, you and your spouse can and should attempt to amicably resolve the various aspects of your divorce, including property distribution. You can do this between yourselves, or with the aid of your attorneys or a qualified mediator.
If you can agree on terms that seem fair, you can then memorialize them in a written contract, usually referred to as a “separation agreement” or a “property settlement agreement.” Then, you can ask the judge to include your agreement in the final judgment of divorce. Your ability to accomplish this can save you time, anxiety, and legal fees.
To learn more about divorce in Michigan in general, see the article “Michigan Divorce FAQ’s”.