When you get divorced, you know that you will usually not get all of the property in the marital residence. It makes sense to you that the property will be divided. But what does that mean when you are trying to plan for what the next phase of your life?
Under Oregon law, marital property is defined as all property owned by either the husband or the wife, including property that was brought into the marriage, acquired during the marriage, or given to or inherited by a party. However, only property that was acquired during the marriage is subject to a “presumption of equal contribution” which usually means that the property is divided equally. Property which is owned prior to the marriage is not subject to the presumption of equal contribution and is usually given back to the party who brought it into the marriage. There is a difference, however, between the value of the asset at the time of the marriage and the value of the asset at the time of the divorce. The original value of the asset at the time of the marriage is usually returned to the person who brought in the asset. Any appreciation or growth in value of an asset may be considered as a separate asset which is subject to the presumption of equal contribution, and equally divided between the parties. There are many factors which go into the decision as to whether the appreciation is divided equally or is returned to the person who owned the asset prior to the marriage.
Let’s look at an example. You have a retirement account that you built up before your marriage, and it has $10,000 in it. You are married for ten years before you get divorced, and at the time of the divorce, it is worth $20,000. How is that asset distributed? The initial $10,000 is likely to be distributed to you, because that was your property before the marriage, and your spouse didn’t contribute towards it. If you didn’t add money to the account during the marriage, and you didn’t actively manage the account or have the account as part of your financial decision making in the marriage, it is more likely that the appreciation acquired during the marriage will be distributed to you as well. The presumption of equal contribution may be “rebutted” which means that a court can decide that in the case of that particular asset, the parties did not contribute equally to an asset, regardless of the legal presumption.
However, if you added money during the marriage, or you decided to contribute marital earnings to another asset because you and your spouse were relying on using that asset, or the asset was held in joint names, the more likely it is that a court would determine that the asset is a marital asset subject to the presumption of equal contribution and divided it equally.
There is a statute that went into effect on January 1, 2012 which states that any asset acquired during a marriage through gift or inheritance to one party, that is held separately by one party on a continuous basis is not subject to the presumption of equal contribution. So if your father dies during the marriage, and you are given an investment account as part of your inheritance that property is not presumed to be acquired jointly and is not subject to being divided equally.
There is a very large “loophole” however, to the idea that property which is not contributed to by both parties, such as property owned before the marriage, or given to you through a gift or inheritance, is separate property and should be given to the person who holds the title. This loophole is called the “just and proper” clause and is part of the statute for property division. “Just and proper” means whatever a judge believes would be fair under the circumstances, regardless of who has the title to the property, or how the property was acquired. As an example, let’s say that you owned a retirement account prior to the marriage, and you didn’t add any more money to it, it just sat in the account and had gains and losses based on factors outside your control. You also owned a home that had equity in it, and during the marriage, you paid all of the mortgage payments separately from your spouse, you maintained the property, but your spouse did live in the house and mowed the lawn or painted the house when it needed paint. Also during the marriage, you inherited an investment account from your aunt. However, things didn’t go all that well financially during the marriage. Neither you nor your spouse were able to contribute to a retirement account, because each of you was unemployed for a period of time, and you spent all of the money just to pay the bills. You didn’t acquire any new assets, you just got by. So after ten years of marriage, what happens? Under the statute, the value of the assets prior to the marriage is not presumptively contributed to by both parties. The inheritance was not contributed to equally by both parties. The equity in the house was acquired before you got married, and you made all the payments. There is a legal argument that you should be awarded all of the property, because all of the property belonged to you separately of the marriage. However, it is likely that a judge would award some of the property to your spouse, even property acquired prior to the marriage because it would be “just and proper.” This is a fancy way of saying that it just didn’t feel fair to the judge that one party would have all the assets and the other party wouldn’t get any of the assets, even though the other party didn’t contribute towards the assets. However, because the other party didn’t contribute towards the assets, it is more likely that the judge would not make an equal distribution of assets, but would probably give more of the assets to the person who owned them separately from the marriage. Short of having a very explicit prenuptial agreement that both parties agreed to and signed well before the marriage, what you believed was your separate property may not remain your separate property.
The property that you have after the divorce is a significant part in how you establish your separate household and maintain separate finance. Because of the complexities of how property is characterized, and distributed during a divorce, you would be well advised to consult with an attorney as to what would likely happen.