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What is the Difference Between Marital & Separate Property in Michigan?

When it comes to divorce, there are many important discussions that while arise during the settlement process. One important topic is property division, especially as assets like joint bank accounts and the family home are important for spouses moving forward individually. Michigan divides marital property using the theory of “equitable distribution,” where the court will divide property based on what is fair and just, not necessarily a 50/50 split.

Michigan divorce laws regarding division of assets classify property as either “marital” or “separate,” where marital property is subject to distribution while separate property isn’t. Marital property is the property that comprises the marital estate, usually consisting of assets that were acquired or earned during the marriage, such as homes, cars, furniture, retirement accounts, pension plans, businesses, and bank accounts. Note that it doesn’t matter which spouse technically earns the asset; while a couple is married, the law still considers the asset to be shared marital property.

Separate property that cannot be divided in a divorce includes any asset obtained or earned before the marriage or any property received through a gift or inheritance at any time. Separate property isn’t usually subject to equitable distribution, so if a spouse inherits money from their parents during the marriage, that money remains the spouse’s separate property.

Be aware that separate property can become marital property – whether intentionally or unintentionally – if a spouse commingles their separate property with marital property. For instance, if a spouse deposits their inheritance money in a joint bank account where money is going in and out during the marriage, a court will likely find that everything in that account is marital property.

Another exception to separate property laws is if the other spouse contributes to the separate property at some point, after which the contributing spouse may be entitled to a portion of that asset. For example, if a spouse owned a house prior to the marriage and during the marriage, the couple mutually paid for improvements made to the house, the non-owner spouse may be entitled to a percentage of the increase in the house’s value attributable to the improvements. It is also worth noting that, unlike some other states, Michigan gives its judges the authority to distribute separate property if they determine that doing so is necessary to meet the needs of the non-owner spouse.

To decide a fair and equitable distribution of property, the court will need to know how much the property and assets in question are worth; additionally:

  • 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 fairness.

Who Gets the House?

One of the most immediately important matters of property division following a divorce is deciding who gets the marital home. The easiest way to deal with the issue is for the couple to agree to sell the property and divide the proceeds, though a judge will often have to step in when couples disagree on this process.

The presence of minor children can also complicate the situation, as often the spouse who has primary residential custody of the children will want to stay in the marital home to continue to stabilize the children’s lifestyle. In this case, the spouse who wants to remain in the house can buy out the other spouse’s interest, or the couple can agree to keep the house in both names while one of them resides there 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 will divide the proceeds. In the meantime, the spouse who’s occupying the home will typically be responsible for paying the costs associated with living there.

If the couple cannot agree on what to do with the home, the judge will decide based on an assessment of what’s most fair to all involved.

Questions? Contact Little & Boylan PLLC

If you have legal questions about property division in Michigan, whether you are currently filing for divorce or are negotiating with your spouse, it is advisable to have an experienced and well-informed legal representative on your side. Our lawyers at Little & Boylan PLLC can assess your situation and help you estimate what marital property may be divided and what might be considered separate property.

Schedule an appointment with our firm by calling (248) 809-1402 or filling out an online contact form to discuss your case in more detail.

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