Divorce: I’m Living in a Pre-Marital Home- Now What?

All property in a divorce fits into one of three buckets:  (1) Husband’s separate property, (2) Wife’s separate property, and (3) Marital Property.  Property will be divided by equitable distribution (which does not necessarily mean equal).  Marital property is broadly construed in order to give effect to the ‘economic partnership’ concept of the marriage relationship recognized in the statute.  Separate property on the other hand is narrowly construed and includes property acquired before the marriage.  I’ve had client come into my office concerned about a pre-marital asset, such as the Marital Residence, in a divorce.  Let’s think this through.

Let’s take the example of a house purchased prior to marriage by one party in which the couples lives before they are marriage and during the marriage.  A house acquired by one spouse prior to the marriage is an example of separate property. However, there a few caveats: (1) the appreciation of separate property (i.e. a house) can be a marital asset; (2) marital assets used to support the separate property (i.e. mortgage, taxes, etc.) entitle the non-titled spouse to a credit during equitable distribution; and (3) whether the couple cohabitated in the separate property, the home, before the marriage does not change the status of property from ‘separate’ to ‘marital’.

Appreciation in a separate asset will be deemed marital property when the appreciation is due specifically to the direct contributions of the non-titled spouse.  This includes overseeing home renovations, painting, maintaining a clean home (vacuuming, raking leaves, cleaning up, household chores).  In other words, appreciation in the value of house, which occurred while both spouses were contributing to the home’s value ,was a marital asset even though the house was owned by only one spouse as separate property at the time of marriage.

Even when the marital residence is deemed separate property, it does not mean that the non-titled spouse does not get any compensation regarding this asset.  Specifically, when marital assets are used to pay for a separate asset (i.e. the house) the non-titled spouse would be entitled to a credit for one-half of the marital assets used to pay for the house.  For example, in Patete v. Rodriguez, 109 A.D.3d 595 (2^nd Dept. 2013) marital residence was deemed separate property because the husband owned it before the marriage.  However, since marital funds were used to pay the mortgage, taxes, and maintenance, the wife was entitled to a credit for one half of marital funds used to pay those costs. See also Khan v. Ahmed, 98 A.D.3d 471, 472 (2^nd Dept. 2012) (where the Court stated that “where marital funds are used to pay off the separate debt of the titled spouse on the separate property, the non-titled spouse may be entitled to a credit”).

Notwithstanding the above, the courts want to ensure that neither party in a divorce receives a “windfall” under equitable distribution (otherwise that would not be “equitable”) so judges will consider the following factors from DRL § 236 B(5)(d):

• the duration of the marriage and the age and health of both parties,

• the need of a custodial parent to occupy or own the marital residence and to use or own its household effects,

• the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution,

• the loss of health insurance benefits upon dissolution of the marriage,

• any award of maintenance under subdivision six of this part,

• any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party,

• the liquid or non-liquid character of all marital property,

• the probable future financial circumstances of each party,

• the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party,

• the tax consequences to each party,

• the wasteful dissipation of assets by either spouse,

• any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration, and,

• any other factor which the court shall expressly find to be just and proper.

Divorce law varies significantly from state-to-state.  If you have specific questions, you are encouraged to speak to an attorney licensed in your jurisdiction.