Equitable Distributions

Understanding Equitable Distribution and Property Division in a Michigan Divorce

Division of property during a divorce can involve many questions and concerns about sentimental items to which both you and your spouse may arguably have a valid claim. Splitting up cherished items and interests is one of the many difficult and sensitive facets of this time of change. Equitable distribution is the general legal principle used to divide marital property during a divorce in both Michigan and Indiana — each of which is an equitable distribution state. Unlike community property states’ rules of equal distribution, which would imply a 50/50 split, states like Michigan and Indiana that use equitable distribution aim to divide assets in a manner that is fair and just — but not necessarily equal. An equitable distribution attorney can guide you through the property division process if you are approaching a divorce.

In Michigan, the process of property division in a divorce begins by distinguishing between marital and separate properties. Marital property generally includes all assets and debts acquired during the marriage, regardless of whose name is on the title. This could include things like homes, cars, retirement accounts, and credit card debts. Separate property, on the other hand, typically includes assets a spouse owned before the marriage, inheritances received by one spouse, and gifts given specifically to one spouse.

In an equitable distribution, marital property is divided fairly between the spouses, while each spouse retains their separate property. However, separate property can sometimes be mixed or “commingled” with marital property, making it subject to division as well.

Equitable distribution is considered fair because it takes into account each spouse’s contributions to the marriage and their current and future financial needs. However, it can also lead to concerns about how the court will value and divide certain assets.

Factors that can impact equitable distributions include:

• Length of the marriage: Longer marriages often involve more intertwined finances.
• Earnings and earning potential: If one spouse earns significantly more than the other, this could affect the division.
• Custody of children: The parent who has primary custody may receive the family home or other assets to minimize disruption for the children.
• Debts: Just like assets, marital debts are divided equitably.

Emotional investment in certain assets can complicate the division process. For example, a spouse might fight to keep a family home or business due to sentimental reasons, even if it might not be in their financial interest.

The process of equitable distribution can be complex and emotionally charged. Having an experienced family law attorney guide you through this process in relation to your goals and priorities is crucial to ensure your rights are protected and to seek a fair and reasonable decision. Contact our equitable distributions attorney team at LaBre Law Office today to schedule a consultation.

Types of Property in a Michigan Divorce

The property of spouses in a Michigan divorce is categorized into three main types, and they are treated differently under Michigan’s equitable distribution rules.

• Marital Property
• Separate Property
• Hybrid Property

Marital Property

This includes all assets and debts that were acquired during the marriage. It doesn’t matter whose name is on the title or who earned the income; if it was acquired during the marriage, it’s generally considered marital property. These assets can include real estate, vehicles, furniture, bank accounts, retirement plans, and business interests. Debts can also be marital property.

Under Michigan’s equitable distribution rules, marital property is divided fairly between the spouses. This doesn’t necessarily mean equally. The court will consider various factors such as the length of the marriage, each spouse’s contributions to the marital estate, each spouse’s economic circumstances, and the needs of each spouse.

Separate Property

This includes anything one spouse owned before the marriage, as well as inheritances or gifts received by one spouse during the marriage, and any property designated as separate property in a valid prenuptial or postnuptial agreement.

In general, each spouse can keep their separate property in a divorce. However, there are exceptions. If separate property has been mixed with marital property (for example, a pre-marital bank account used for joint expenses), it may be considered part of the marital estate and subject to division. Similarly, if the value of separate property has increased due to the efforts of the other spouse or marital funds, that increase in value may be considered marital property.

Hybrid Property

This term refers to property that has elements of both marital and separate property. For instance, a house one spouse owned before the marriage (separate property) that became the family home and was paid off with marital funds could be considered hybrid property. In such cases, the court will determine what portion of the property is marital and what portion is separate.

Work closely with an experienced equitable distributions attorney to accurately identify and value your property while advocating for a fair division of assets. This process can be complex, but proper legal guidance can help to ensure you navigate it effectively in protection of your interests.

Types of Marital Assets and Hybrid Assets That May Be Divided Through Equitable Distribution in a Divorce

The following are some common types of assets that may be subject to equitable distribution as marital or hybrid assets during property division in a Michigan divorce:

• Real Estate: This includes the marital home and any other real estate properties owned by the couple. If one spouse owned a property before marriage, it’s generally considered separate property unless it has been commingled with marital assets. This may have important implications if you are wondering who keeps the house in a divorce in Michigan.
• Personal Property: This includes items like furniture, appliances, jewelry, artwork, vehicles, and other personal belongings acquired during the marriage.
• Financial Assets: These include bank accounts, stocks, bonds, mutual funds, retirement accounts (like 401(k)s, IRAs, and pensions), and life insurance policies with cash value. If the funds were acquired or increased in value during the marriage, they’re typically considered marital property — even if these accounts are in one spouse’s name.
• Business Interests: If either or both spouses own a business, the value of the business interest may be divided. Determining the value of a business can be complex and often requires professional valuation.
• Debts: Just like assets, debts incurred during the marriage are also divided in a divorce. This can include mortgages, car loans, credit card debts, and student loans.

After reviewing the list above, you probably have questions or concerns about some particular assets that have been shared in your marriage. The categories above may be applicable to your situation, but your specific assets subject to division will depend on the individual circumstances of you and your spouse. At LaBre Law Office, we are prepared to guide you through this process and build a legal strategy to advocate for a fair division with your interests and goals in mind.

Equitable Distribution of Commingled Property in Michigan

Commingled property refers to separate property that has been mixed or combined with marital property in such a way that it’s difficult to distinguish the two. This can have significant implications, as it may change how the property is divided under Michigan’s equitable distribution rules. When separate property becomes commingled, it can be treated as marital property — making it subject to division.

The following are examples of assets that may become commingled property:

• Commingled Bank Accounts: If one spouse enters the marriage with a separate bank account (separate property), but then both spouses deposit their paychecks into that account and use it to pay household expenses (marital property), the account could become commingled.
• Commingled Real Estate: If one spouse owns a home before the marriage (separate property), but the other spouse contributes to mortgage payments or home improvements during the marriage (marital property), the home could become commingled.
• Commingled Investments: If one spouse has an investment portfolio before the marriage (separate property) but adds to it with earnings made during the marriage (marital property), the portfolio could become commingled.

Determining whether property has been commingled can be complex, and often requires tracing funds or assets back to their source. This can be challenging, especially in long marriages where records may not be available. Consult your attorney to determine legal strategies for property that may have become commingled.

How a Court Determines Equitable Distribution of Property in Michigan

The aim of the court is to reach a fair and equitable distribution of assets that allows both spouses to maintain a similar standard of living post-divorce. The court follows a sequence of legal processes while considering several important factors to arrive at a fair division of assets in Michigan.

The Order of Legal Processes for Equitable Distribution

1. Identification: The first step is to identify all the assets and debts that were acquired during the marriage. This includes real estate, personal property, financial assets, business interests, and debts.
2. Classification: Next, the court classifies each asset or debt as either marital or separate property. Generally, anything acquired or earned during the marriage is considered marital property, while anything owned before the marriage, received as a gift or inheritance, or specified as separate in a prenuptial agreement or postnuptial agreement, is considered separate property.
3. Valuation: The court then assigns a monetary value to each marital asset or debt. This may require appraisals or professional valuations, particularly for high-value assets like real estate or businesses.
4. Distribution: Finally, the court divides the marital property in an equitable and fair manner. This doesn’t necessarily mean an equal 50/50 split, but rather a division that is just and reasonable based on various factors.

Factors and Considerations Affecting a Fair and Equitable Distribution of Assets in a Divorce

When determining equitable distribution, the court considers several factors, including:

• Length of the Marriage: Generally, longer marriages lead to more intertwined finances, which can influence the division of assets.
• Contributions to the Marital Estate: This includes both financial contributions (like income) and non-financial contributions (like homemaking or child-rearing).
• Economic Circumstances of Each Party: This includes each spouse’s income, earning potential, age, health, and future financial needs.
• Conduct of the Parties: While Michigan is a no-fault divorce state, the court may consider a spouse’s behavior if it had a direct impact on the marital finances (such as dissipation of assets).
• Custody of Children: The parent who has primary custody may retain the family home or other assets to minimize disruption for the children.

How a Prenuptial or Postnuptial Agreement Can Affect Equitable Distribution Decisions

If a valid prenuptial or postnuptial agreement is in place at the time of divorce, the terms of that agreement will generally take precedence over Michigan’s default rules of equitable distribution. This means the court will divide the couple’s assets and debts according to the agreement, rather than deciding what it believes to be fair and equitable.

For example, a prenuptial agreement might specify that each spouse will keep any assets they brought into the marriage (separate property), and how any assets acquired during the marriage (marital property) will be divided. It could also include provisions for spousal support.

It is important to note that these agreements must meet certain legal requirements to be enforceable. They must be in writing, signed by both parties, and entered into voluntarily without duress or fraud. Both parties must fully disclose their assets and debts, and the agreement cannot be unconscionably unfair.

How a Family Law Attorney Can Assist You With Equitable Distribution

An equitable distribution lawyer is a vital advocate playing multiple roles when navigating the complexities of property division and equitable distribution in a Michigan divorce proceeding:

• Financial Analyst: Your attorney will meticulously analyze the financial data and assets of both parties. This includes identifying and valuing all marital property, which can range from real estate and personal belongings to financial assets like bank accounts, retirement plans, and business interests. This also involves distinguishing between marital and separate property, which can sometimes be complex — especially in long-term marriages or where assets have been commingled.
• Negotiator: Your attorney helps you negotiate with the opposing party to reach an amicable settlement. This involves strategizing the appropriate approach for the division of assets based on your needs and goals, then negotiating effectively to achieve this.
• Legal Guide and Advocate: Your attorney guides you through the legal process, explaining the applicable laws and procedures while setting your expectations at each stage and advocating for your interests in court —  presenting compelling arguments to pursue an equitable distribution decision that reflects your needs and goals.

The Impact of Fault in Fair Division of Assets

In Michigan, one key factor to consider is that while it is a no-fault divorce state — meaning you don’t need to prove wrongdoing to seek a divorce — fault can play a role in the division of assets. For example, if one spouse dissipated marital assets through reckless spending or an affair, the court may consider this when dividing the assets.

An experienced equitable distribution attorney is an invaluable ally providing support and guidance when going through a divorce in Michigan, often making the difference between a fair settlement that protects your interests and one that leaves you at a disadvantage. If you are facing this situation, your first step is to schedule a consultation.

Contact LaBre Law Office to Discuss What Equitable Distribution May Mean for Your Assets and Your Future Following a Divorce

You and your spouse have likely amassed a variety of assets both before and during your marriage. Disagreements and conflicts are likely, despite efforts such as mediation and prenuptial or postnuptial agreements. The courts will seek fair and appropriate division of your assets, but you need an effective advocate to represent your interests, your emotional connections to particular assets, and your perspective as you approach and navigate this process. We are prepared to serve you throughout the “Michiana” area, as we are licensed on both sides of the Michigan-Indiana border.

Contact LaBre Law Office today to schedule a consultation. We will discuss the unique circumstances surrounding the categorization of your assets, your goals, and your options for pursuing your property interests. We will begin to formulate a legal strategy and identify your next steps towards pursuing an equitable distribution decision that is fair, agreeable, and appropriate.

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