The short answer is, NO!
The longer answer: The most common misconception about property division in divorce is you have to give your spouse half of “everything.” This is so, I think, in part because it is an easy number to remember – half – and also in part because, for most marriages, it is not easy to distinguish a “marital asset” (that you do divide) from a “separate asset” (that you do not divide, absent special circumstances). Over time, separate assets get used, traded-in, refurbished, spent, shared, combined with other assets, etc., etc. They lose their character as “mine” and become “ours.”
And so my new clients often come to my office with lists of property, telling me they’ve “already figured it out” – “it” being how they want their property divided, how they think it is supposed to be divided. Half the plates, half the holiday decorations, half the photos. That is all fine. Those are items created, acquired, bought and/or used during the marriage. But then I see items like “half the pension.” Well, wait a minute – even for the years you were not married? Or things like “half the money we [really, I] got from Aunt Mae’s will.” Wait –where is that money, and did your spouse have access to it?
These could be separate assets. I tell them:
Mostly, the divorce court will divide the marital estate. The marital estate includes marital assets you, your spouse, or both of you created, bought, used, etc., during the marriage. The same is true for debt. However, there are always exceptions. For example, inheritances and gifts to one spouse are generally non-marital even if acquired during the marriage. Spending that did not benefit the marriage partnership (e.g., a trip with a boyfriend) is generally separate debt. As a final example, in “community property states” (a minority), so too are items you and your spouse identify as non-community property, usually in writing. What we are looking for are assets and debts during the marriage that do not fall into one of the exceptions. So, “everything” is really not “everything” at all – it is generally what you acquired between the date of your marriage and the date of your divorce or separation, unless excepted.
But, again, there are exceptions for that time period, too. Sometimes, the property you think is yours has turned into marital property. There are things you can do to keep your property yours:
First, do not comingle it. Commingled property is assets and debts that were non-marital but which were traded in to acquire new property during the marriage, repaired or enhanced during the marriage with marital funds, or, in some states, treated as marital property by written agreement or use during the marriage. A good example is a classic car purchased as a bachelor that you remodeled during your marriage with money you earned at work and deposited into a joint bank account. Well, why not simply separate the pre-marriage value, right? Some courts refuse to do any separating, reasoning that the non-marital property lost its status forever as soon as marital property mixed with it. Other courts will attempt separate valuations if the evidence presented is sufficient. A skilled attorney and expert testimony from an appraiser are essential.
Second, do not invest in it, repair it, rent it or do anything but leave it. Avoid active appreciation. Appreciation is the property’s increase in value. During the marriage, the appreciation may be passive or active. Passive appreciation is the increase in value due to the surrounding circumstances, not your conduct. Active appreciation is the increase in value due to your contribution, such as remodeling, reinvesting, and so forth. In most states, passive appreciation is non-marital property. However, active appreciation due to one or both spouse’s involvement during the marriage is.
Third, give your spouse a hefty share of marital property to keep it. If your spouse has a sizable share of property, it is less likely yours is invadable. Invadable property is one spouse’s property the court nonetheless divides because the facts and circumstances of the case, particularly one spouse’s needs, justify division. Each state has a different invasion law, so be sure to research the laws in your state to determine what, if any, invasion will occur in your case. In general, however, the laws allow invasion if the other spouse “needs” a share of the property due to an inequitable division of marital property or other financially dire circumstances and/or the spouse contributed to the property’s acquisition, use or maintenance.
Finally, keep records! If you want to prove that “everything” your spouse says is half hers is not much at all, you need to prove it with admissible records of who owned or owed what when. Convincing evidence. Get titles, security agreements, old photos, loan agreements, appraisals, stock certificates, your broker’s account records, and any other record that tends to prove the property is what you say it is, yours. Testimony about what you remember buying and never, ever, ever using during your marriage, when your spouse staunchly says the opposite, is wholly unconvincing.
For example, I have a client who paid over $100,000 for a pool league and tournament business on mostly verbal agreements and handshakes, a few chicken-scratch notes memorializing the deal. This is every lawyer’s nightmare. He purchased the business when it was not turning a profit and intended to baby it with personal promotions in small bars, restaurants and hotels across the state into profitability. He did. The problem is, then he got married. His wife was already pregnant and unemployed. She offered to do the bookkeeping for the business at home – putting flyers together for tournaments, keeping track of who won what tournaments, collecting dues, renting pool tables, etc. She did everything from home. When the economy tanked, just a few months after their marriage and his son’s birth, he took a construction job up state to support the family. He returned home just a few weeks later to check in, with money. To his dismay, she changed the locks, filed for divorce and obtained an order allowing her exclusive rights to manage “their” business, a business she claims he offered one-half of to her if she managed it. There is not a single document evidencing that offer. There is not a single document evidencing his 100% ownership, either. Moreover, because she contributed “sweat equity,” according to the judge, the business has become inextricably commingled with marital assets (labor) and is now a marital asset subject to division. The division the judge has in mind? 100% ownership to the wife because the business is her sole source of income. We are challenging the ruling, but, as I said, it is every lawyer’s nightmare to prove or disprove an agreement with no documentary evidence.
Add that to the wife’s contributions to the business’s growth, something a business expert must now determine, and this client’s once separate property is tossed into the divorce court as a potential piece of property to divide in an expensive -- no, very expensive -- trial.
But the truth is, this is common in divorces with property disputes. And that is what makes the distinction between a marital asset and a separate asset difficult.