Updated: 06/28/2017 3:55 PM | Print Story |  Email

Divorce and Nonmarital Property

When you get a divorce, not everything is split right down the middle. Jodi and Shannon from Terzich and Ort stop by to talk about what "nonmarital" property is. 

Jodi and Shannon's thoughts are below:

Everything in a marriage is considered “marital property” which means that it is subject to division between the spouses if they divorce. But there is an exception to every rule and in this case the exception is that everything is marital EXCEPT for things a spouse can prove is non-marital.
 
For the legal definition of non-marital property, click here. (Under Subd 3)
 
And this requires the person claiming it is non-marital to prove it is non-martial. 
 
Some common things people come into a marriage with:
  • Personal property like the engagement ring
  • Cars
  • Retirement assets
  • Homes/Real estate
  • Businesses
 
For every assets claimed a person must show that s/he owned it before the marriage and that it is either
  1. Still there today or
  2. It was sold and the money from the sale reinvested elsewhere 
This is done by what we call “tracing” 
 
Identifying an asset today and “tracing” its origins back to something that existed at the time you married. 
This is done most commonly through documents, bank statements, appraisals, closing paperwork, tax returns, financial statements.  
 
For example, you have $2,000 in your 401k when you get married. When you divorce you have $20,000 in the same 401k; the first $2,000 is yours the remaining $18,000 is divided between you and your spouse.  So you get $11,000 and your spouse gets $9,000.
 
It's not uncommon for marriages over a length of time to see changes in jobs and rollovers in investment and retirement assets. In those cases it is still possible to trace the origins of existing retirement assets back to the date of marriage, it is just more difficult. 
 
Another example You have a townhome before you get married,  when you get married you sell it – you take the money from the sale and buy a house with your spouse.  When you get divorced the house isn’t all your non-marital asset but a portion of it is.  Simple math, if you put 20% down and that 20% came from the sale of your townhouse then at the time of divorce (assuming nothing else happens to the house) 20% of the value of the house is your non-marital.
 
It’s the assuming nothing else happens that destroys the non-marital claim. You can’t take the money out and put it back later and still consider it non-marital.  This is where the changes in the market, refinancing, remodeling all come into play. Like investment assets – its not that it can’t be traced it’s just that doing so is more challenging and therefore many times more expensive.
 
Each asset will be case specific and you should discuss with your attorney the facts of your case and the asset to decide what can be claimed non-marital at the time of divorce.
 
In some cases the  benefit isn’t worth the cost of the tracing.
 
Commingling destroys a non-marital claim; You can’t have $5,000 in your checking account at the time of marriage, deposit paychecks, and gifts and tax refunds, pay bills and go on vacation for 10 years and then get divorced and ask for your $5,000 back.
 
For personal property, like the antique bedset or china other personal items, usually there aren’t statements. There might be photos or in other cases it takes the testimony of the gift giver, or someone else present at the time of the transfer.
 
Remember if Grandma gives you China for your wedding gift, that’s a gift to you and your spouse. It's marital. But the engagement ring that you gave or received PRIOR to the marriage is a non-marital asset to the receiver.
 
Debts can be non-marital too, such as student loans.

If you have questions or would like to talk with Jodi and Shannon, click here.