Identifying a spouse's separate or non-marital property is one of the more complicated aspects of divorce. While hard and fast rules do exist regarding the other spouse's right to a share of such assets, they tend to be subject to a host of exceptions and other rules. Premarital property usually belongs wholly to the spouse who brought it into the marriage and the other spouse has no right to it – unless certain other factors exist.
When you divorce, the court typically divides only the marital property -- and each spouse is entitled to a share. This property includes everything you earned or purchased while you were married, but not property you owned before you married. This is your separate property and your spouse does not have a right to it in most cases -- generally, as long as you kept your assets solely in your name, your spouse had little or no involvement with them, and they did not appreciate in value thanks to marital efforts.
Appreciation of Assets
If your premarital property increases in value during the course of your marriage, this creates something of a gray area. Generally, passive appreciation of an asset remains your separate property, whereas active appreciation creates an interest in the property for your spouse. For example, if you own a home before you marry, you and your spouse never live in it or use it as the marital residence, and if the mortgage is paid off and no marital money is used toward its upkeep or maintenance, your spouse has no right to any of it. Any increase in value would be due to market conditions. This is passive appreciation. If the increase in value can be traced to marital contributions – either money or sweat equity, such as your spouse working to help you improve the property – this is active appreciation. In this case, your spouse might have a right to a share of the difference between the property's value at the time you married and its value at the time you divorce.
Transmutation of Separate Property
Transmutation is another exception to the general rule that premarital assets are a spouse's separate property. Transmutation occurs when you take some action that makes it appear that you're gifting the property to your marriage. This can transform it from non-marital property into marital property -- and give your spouse a right to a share in it. For example, you might convey your premarital home to yourself and your spouse jointly after you marry. Some state courts will consider property transmuted if the two of you live there for many years and raise your family there. However, your spouse would have to prove your intention in court, which can be difficult, particularly if you never used marital money to make mortgage payments or to maintain the property. Some states make it almost impossible to transmute premarital property unintentionally. For example, in California, you must state in a written document that you intend to convert your separate property to marital property -- and that you're making a gift of it to your spouse or to the marital estate.
Commingling Separate Property
Commingling your separate property with marital property can erase its immunity from distribution in a divorce as well -- and it can occur because you're not aware that what you're doing creates a problem. Commingling most commonly happens when marital money is mixed with your separate funds, typically because one or both of you made deposits or contributions to a premarital account during the marriage. At worst, the entire asset may become marital property if you can't trace its original value and the marital money that contributed to the current balance. At best, you can segregate the premarital portion, entitling your spouse only to a share of what remains. Commingling often occurs with retirement accounts, and this is sometimes unavoidable. For example, if you worked and contributed to the account before you married, and then continued in the same job after your wedding, the balance at the time of your marriage and any growth associated with that balance is yours. A forensic accountant can isolate the marital portion, which you may have to share with your spouse.
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