One of the thorniest parts of divorce is the process of dividing up your property. If you have researched Utah law on the subject, you will have read that the court is supposed to divide all marital property in an equitable manner. Sounds reasonable and straightforward — but what exactly does it mean, and what is the difference between marital and separate property?
There are two words that need to be unpacked in order to have a good understanding of Utah property division in divorce. The first is “equitable.” Although it looks similar, “equitable” does not mean “equal”; it means “fair.” Although in practice equitable division of property is usually pretty close to an equal split, it’s important to remember that you don’t have a right to a precisely 50-50 division. There might be circumstances that warrant giving one spouse slightly more of the property and the other slightly less.
The other term that merits close examination is “marital” property. While marital property is to be divided in a divorce, not all property is marital property. Some property, such as inheritance, or a gift to one of the parties, is considered non-marital or separate property. Property that was owned by one party before the marriage is usually considered non-marital property, too. If that property appreciates in value during the marriage, under most circumstances, the appreciation is also considered separate property.
In general, though, in the words of the Utah Supreme Court, marital property includes “all of the assets of every nature possessed by the parties, whenever obtained and from whatever source derived.” That includes income from work during the marriage and real estate and other property purchased during the marriage.
Is That Property Marital or Non-Marital?
As you can imagine, quite a lot can hinge on the question of whether an asset is marital or non-marital (separate). And the answer is not as clear-cut as you might think. That’s because property that once was clearly separate can become marital, through a process called commingling.
Let’s imagine a fictional couple called Mike and Carol. During the marriage, Carol inherits $100,000 from her dear friend Alice. She places it in the joint bank account she shares with Mike. The next week, they put down a deposit on an architect-designed house in Salt Lake City and live there for ten years before they divorce. Carol claims that she should receive an extra $100,000 from the equity in the house because of the money she put into the joint bank account to help fund it.
Unfortunately for Carol, this argument probably will not fly with the judge in the divorce. When Carol chose to put the money into the joint bank account, it became commingled with marital funds. Then those funds were used to purchase a marital asset, the house. Most courts are not willing to try to trace an asset spent several years ago back to its source. The court will likely deem the house marital property, and refuse to give Carol an extra share.
Now, let’s say that Carol had an investment account before marriage worth $200,000. Carol invested wisely, and without further investment or effort on her part, the account grew in value to $300,000 during the marriage. Mike acknowledges that Carol’s investment account is her separate property, but argues that the appreciation occurred during the marriage, and so should be marital property. Carol, for her part, argues that she is entitled to part of the appreciation of Mike’s cottage, because she was actively involved in improving it. A judge is more likely to consider the appreciation of the value of the cottage marital property that is subject to division in the divorce (but not the cottage itself), because Carol actively contributed to the increase in value.
How to Protect Your Separate Property
The best time to protect your separate property is at the start of your marriage, or before. A prenuptial agreement can detail what property you each possess and your intentions as to how the appreciation of that property will be treated. A prenuptial agreement can also, of course, set forth your intentions as to how any marital property will be divided. As long as such an agreement isn’t grossly unfair, and both of you willingly enter into it with full information, a court will honor it.
Even without a prenuptial agreement, there are ways to protect your separate property. If you have a separate bank account or investment account before marriage, keep it in your sole name and don’t take funds out of it for marital purposes, like to buy a house or car. If you owned real estate before marriage, keep it in your sole name, especially if it is paid off. If you sell it, deposit the funds into an account in your sole name and do not commingle those with marital funds. It is imperative that a judge be able to easily trace the funds in the account directly back to your separate asset.
Contact an Experienced Utah Family Law Attorney
If you have questions about your family law matter, Ashley Wood Law, P.C. can help. Contact us online at contact@ashleywoodlaw.com or call (801) 459-3499 to schedule a consultation with an experienced Utah family law attorney.