Gains in separate property during marriage

Gains in separate property during DivorceWhen parties get married, they often come in with assets that they owned prior to marriage. In a state where equitable jurisdiction is the law, this property would be deemed separate property.

In a divorce where equitable distribution is the law, separate property is generally allocated to the party that had it before the marriage. The marital property and debt is what is divided between the parties in a “just” manner in a divorce.

Where the lines can be blurry are situations like this one. Let’s say a party has an investment account (or other account or asset) prior to the marriage in their sole name. Let’s say there were significant funds in their pre-marriage account. Let’s say then the account goes up in value during the marriage and the account remains in their sole name.

Does spouse who had the account pre-marriage, and whose name it is in, get to keep all these gains in a divorce?  Or does the other spouse have an interest in the account or the gains themselves simply because they were married when the gains took place?

The laws in each state can vary. The facts can also change the analysis. This is why a party should speak with an attorney who is licensed and competent in their jurisdiction.

But in a general sense, if the account remains in the spouse’s sole name, that account is still their separate property. The value that was in that account as of the date of marriage, if it can be proven or traced, is generally allocated to that spouse as separate property.

With the gains, the question would be whether new contributions were made into the account with marital funds during the marriage?  If so, that portion of the account will probably be considered marital property.

On the other hand, if no contributions were made during marriage and the account simply went up due to market conditions (i.e. marketing going up or asset otherwise increasing in value), generally the other spouse could not lay claim to those gains. The reason is their “labor” or other actions did not help contribute to these gains.

On the other hand, if dividends were paid, that could complicate the analysis. In some instances, the dividends might be considered marital property because they are profits or income being paid during the marriage. But gains in the value of an account or asset would generally not be considered marital property.

If you are going through a divorce where you had significant assets before marriage, you can contact Stange Law Firm, PC at 855-805-0595.

Leave a Reply