What’s Mine is Mine: Marital and Non-Marital Property in Divorce

Many divorce cases require a factual determination of what assets (or debts) are marital or non-marital separate property, and these issues range from the very simple to highly complex.  The general basic rule (with several exceptions) is that property acquired during the marriage is marital property, and it has to be equitably divided in the divorce.  The other general basic rule is that separate property remains separate property.  While it might seem very simple to determine which belongs to whom, separating marital from nonmarital property can be akin to unscrambling an egg.

Consider the following scenario:  Husband and Wife marry young when neither has a house with equity, a retirement account, or any inherited property.  If they divorce, most of their accumulated property will be marital.  If after twenty years of marriage, they have a home with $150,000 equity, a 401k through Husband’s employer worth $100,000.00, and savings of $50,000, by and large, all of those assets will be marital property subject to equitable division.  This is true even if the Husband has been the sole or primary breadwinner in the marriage.  The laws views their assets as having been acquired by joint marital efforts.  (Yes, his 401k is marital property, even if it is from “his” job.)

With just a few seemingly minor changes to the above facts, the situation becomes considerably more complex:  Husband and Wife marry.  Wife marries with $20,000 in her 401k.  Husband inherits $100,000.  He uses that money to make a $50,000 down payment on a house and invests $50,000 in a joint brokerage account.  When they decide to divorce, Wife’s 401k is worth $70,000, the home has equity of $100,000, and the joint investment account is valued at $200,000.  Now what belongs to whom?

Wife’s 401k:
The 401k had a nonmarital value of $20,000, and now it is worth $70,000.  If she has invested in the 401k during the marriage, part of that 401k is marital and part is non-marital.  Because the law doesn’t like to make things too simple, her non-marital portion is not simply $20,000; it’s whatever the present value of $20,000 in proportion to the balance.

The Home Equity:
Husband’s nonmarital down payment on the home of $50,000 can become partly marital property, or depending on the facts and circumstances, it can remain nonmarital property.  If the parties’ home appreciates in value simply because of “market forces” (ie – houses become pricier), then Husband’s $50,000 grows in proportion to the value of the house.  However, if the value of the home appreciates because of marital efforts, then a portion of the equity in the home becomes marital property.  Marital efforts can include: paying down the mortgage and making capital improvements to the house, among others.

The home equity question requires an analysis of Georgia’s “source of funds” rule.  The gist of the source of funds rule is that nonmarital money can be tracked throughout the marriage so that its value can be determined at the time of the divorce and removed from the marital assets.  Sometimes …

The Brokerage Account:
Remember Husband’s deposit of $50,000 into a joint brokerage account?  Now that account is worth $200,000.  How much is marital, and how much is nonmarital?  The answer is, “It depends.”  It depends on what the parties have done with the account over the years, and the arguments of good attorneys.

If the parties have routinely bought and sold investments in the account or made significant deposits and withdrawals during the marriage, then all or a portion of that account could become marital property.  Wife’s attorney could argue that the funds have been “comingled” in such a way that the asset is now entirely marital.  Alternatively, the attorney could argue that, by placing the $50,000 into a joint account, Husband made a gift to the marriage and that the entire $50,000 (now $200,000) became marital property.

These questions about marital and nonmarital property are difficult ones in a divorce, and your attorney should be able to advise you as to how they may be categorized by a court.  Because this is such a fact-driven aspect of any divorce and because the parties can sharply differ on interpreting those facts, a Husband or Wife in this situation would be well-served by an attorney, even if the divorce is uncontested.

As in the above scenario, there is room for interpretation of the value of marital and nonmarital assets; what may seem clearly fair to Husband may seem unfair to Wife.  Knowing what can be gained or what may be at stake at the ultimate trial of a divorce case is an essential question.  A family law attorney should be able to help a party wade through these factual issues and give clear advice on how the values of different assets could be interpreted by a judge or jury.