4

If someone owns a house before marriage, would that house be exempt from asset division in divorce?

For simplicity, assume that otherwise, asset picture is fairly simple and even (2 working spouses with similar income, no children, a shared savings/checking account, similarly sized retirements accounts, no other properties or investments).

Would the answer depend on any factors other than whether the state is Equitable Distribution vs community property?

Jurisdiction: USA, but for example let's use California and New York for two types, if that's needed to narrow things down.

Obviously, assume that there's no negotiated settlement between spouses, and divorce goes to family court judge.

0

2 Answers 2

4

Overview

If someone owns a house before marriage, would that house be exempt from asset division in divorce?

For simplicity, assume that otherwise, asset picture is fairly simple and even (2 working spouses with similar income, no children, a shared savings/checking account, similarly sized retirements accounts, no other properties or investments).

This seemingly simple question doesn't have a simple answer.

This is in part because state law on the subject varies so much.

Would the answer depend on any factors other than whether the state is Equitable Distribution vs community property?

Yes. The other reason that this is a difficult question to answer is that there are many other potentially relevant factors. This answer will provide some examples of some of the relevant facts that were not provided in the question.

State Law Varies Greatly

It is necessary to look to particular states, such as the New York and California, as suggested in the question, regarding this matter, as there is no uniformity or even guidance in federal law (there is even a common law exception to federal court jurisdiction that actually specifically prohibits federal courts from handling divorces and other domestic relations matters).

There are two extreme starting points in terms of how this question is handled under state law, but many states are hybrid systems that borrow from each of these systems. Also, there are very practically important differences in detail with respect to how final outcomes are determined, even in states that have the same basic systems.

Once critical details are considered, there are probably at least half a dozen basic sets of rules among the fifty U.S. states concerning the question of how a house acquired prior to marrying by one spouse before marriage is treated in a property division during a divorce, and each of those basic sets of rules has some state specific variations.

This also sets aside the ubiquitous possibility in every U.S. state that these rules have been modified by a marital agreement between the spouses (such as a prenuptial agreement).

There are also significant differences between states, beyond the scope of this question, regarding the inheritance rights of a spouse in a house acquired by the other spouse before the marriage began in that spouse's sole name, at death.

Equitable Division

One of the two extremes in U.S. law is the pure traditional equitable division rule, in which all property of each spouse (regardless of whose name it is titled in) may be distributed in a manner that the judge finds to be equitable, rather than equal, and the concepts of separate and marital or community property does not exist. In the traditional equitable division regime, and in some states, but not others, a divorce court may consider marital fault in some (but not all) divorces, in deciding what is equitable in divorces commenced on fault based grounds. Each of these states has both fault based and no-fault divorces, a marital fault is not considered in property divisions in no-fault divorces in these states. New York State, for example, has a mixed fault and no-fault based divorce system.

In equitable division states, often a business or a pension will be allocated entirely to a spouse who is active in the business or occupation associated with that asset, and a house will be allocated to a spouse who is not involved with the business or the occupation that gave rise to the pension.

Community Property

Another of the extremes in U.S. law is the community property regime, in which property acquired before the marriage and by a gift or inheritance are separate property not subject to division in a divorce, and everything acquired during the marriage is owned 50-50 by the spouses. In a community property state, property acquired by either spouse during the marriage automatically becomes property that is owned 50-50 by the spouses immediately and often some kinds of property formally titled in only one spouse's name can't be transferred without the consent of both spouses.

For example, in California, which is a community property state, a house purchased in the name of one spouse before the couple marries is initially, at least, on the day of the wedding, entirely the separate property of the spouse who owns it. But, considerations discussed below regarding appreciation and the source of payments related to the house will sometimes muddy the waters of this analysis.

New York State: A Hybrid System

New York State is strictly speaking an equitable distribution state and a spouse does not have a present ownership interest in property titled in their spouse's name which is acquired during the marriage. But, New York State does make a distinction between separate property and marital property at the time of a divorce, so it is really a hybrid of a traditional equitable division regime and a community property regime, unlike some other states that are more pure examples of the traditional equitable division system.

During the divorce both spouses have to tell the judge about their income and any debts they owe. When the court grants a divorce, property will be divided equitably (though not always equally) between the spouses.

New York's Equitable Distribution Law recognizes marriage as an economic as well as a social partnership. The law requires that a judge divide property as fairly as possible.

The Equitable Distribution Law talks about two types of property for purposes of divorce: marital property and separate property. Marital property will be divided between the two spouses.

Marital Property: all property either spouse bought during the marriage, regardless of whose name is on the property. Pension plans and other retirement plans are considered marital property. The portion of marital property earned during the marriage will be divided by the court.

Separate Property: property a spouse owned before the marriage, or any inheritance or personal injury payments or gifts from someone other than the spouse during the marriage.

To see the factors a court should consider in making an equitable distribution award, see Domestic Relations Law § 236(B)(5)(d).

(Source)

In New York State, separate property and marital property is defined as follows:

c. The term "marital property" shall mean all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held, except as otherwise provided in agreement pursuant to subdivision three of this part.

Marital property shall not include separate property as hereinafter defined.

d. The term separate property shall mean:

(1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;

(2) compensation for personal injuries;

(3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;

(4) property described as separate property by written agreement of the parties pursuant to subdivision three of this part.

(Source)

The factors to be considered in the equitable property division in New York State, per the same source, are as follows:

  1. Disposition of property in certain matrimonial actions.

a. Except where the parties have provided in an agreement for the disposition of their property pursuant to subdivision three of this part, the court, in an action wherein all or part of the relief granted is divorce, or the dissolution, annulment or declaration of the nullity of a marriage, and in proceedings to obtain a distribution of marital property following a foreign judgment of divorce, shall determine the respective rights of the parties in their separate or marital property, and shall provide for the disposition thereof in the final judgment.

b. Separate property shall remain such.

c. Marital property shall be distributed equitably between the parties, considering the circumstances of the case and of the respective parties.

d. In determining an equitable disposition of property under paragraph c, the court shall consider:

(1) the income and property of each party at the time of marriage, and at the time of the commencement of the action;

(2) the duration of the marriage and the age and health of both parties;

(3) the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;

(4) the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;

(5) the loss of health insurance benefits upon dissolution of the marriage;

(6) any award of maintenance under subdivision six of this part;

(7) 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 court shall not consider as marital property subject to distribution the value of a spouse's enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement. **However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;

(8) the liquid or non-liquid character of all marital property;

(9) the probable future financial circumstances of each party;

(10) 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;

(11) the tax consequences to each party;

(12) the wasteful dissipation of assets by either spouse;

(13) any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;

(14) whether either party has committed an act or acts of domestic violence, as described in subdivision one of section four hundred fifty-nine-a of the social services law, against the other party and the nature, extent, duration and impact of such act or acts;

(15) in awarding the possession of a companion animal, the court shall consider the best interest of such animal. "Companion animal", as used in this subparagraph, shall have the same meaning as in subdivision five of section three hundred fifty of the agriculture and markets law; and

(16) any other factor which the court shall expressly find to be just and proper.

e. In any action in which the court shall determine that an equitable distribution is appropriate but would be impractical or burdensome or where the distribution of an interest in a business, corporation or profession would be contrary to law, the court in lieu of such equitable distribution shall make a distributive award in order to achieve equity between the parties. The court in its discretion, also may make a distributive award to supplement, facilitate or effectuate a distribution of marital property.

f. In addition to the disposition of property as set forth above, the court may make such order regarding the use and occupancy of the marital home and its household effects as provided in section two hundred thirty-four of this chapter, without regard to the form of ownership of such property.

g. In any decision made pursuant to this subdivision, the court shall set forth the factors it considered and the reasons for its decision and such may not be waived by either party or counsel.

h. In any decision made pursuant to this subdivision the court shall, where appropriate, consider the effect of a barrier to remarriage, as defined in subdivision six of section two hundred fifty-three of this article, on the factors enumerated in paragraph d of this subdivision.

Thus, in New York State, unlike Colorado (discussed below), appreciation in the value of separate property during the marriage is separate property and not marital property.

Section 234 of the New York Domestic Relations Law referenced in the bolded language above states:

§ 234. Title to or occupancy and possession of property.

In any action for divorce, for a separation, for an annulment or to declare the nullity of a void marriage, the court may (1) determine any question as to the title to property arising between the parties, and (2) make such direction, between the parties, concerning the possession of property, as in the court's discretion justice requires having regard to the circumstances of the case and of the respective parties. Such direction may be made in the final judgment, or by one or more orders from time to time before or subsequent to final judgment, or by both such order or orders and final judgment. Where the title to real property is affected, a copy of such judgment, order or decree, duly certified by the clerk of the court wherein said judgement was rendered, shall be recorded in the office of the recording officer of the county in which such property is situated, as provided by section two hundred ninety-seven-b of the real property law.

Usually, the authority granted by Section 234 is used to enter temporary orders granting a spouse possession and use of a residence titled in the name of the other spouse until the case is concluded, although it could be applied to a post-decree decision as well.

Also, while New York State now finally has "no fault" divorces (it was the last state in the U.S. to make this option available), it also allows spouses to commence a fault based divorce. In a fault based divorce, marital fault (e.g. having an affair) can be considered as a factor by the court in equitably dividing the couple's property in the divorce if fault is successfully established.

Fun Fact: In New York State, family court judges don't have jurisdiction over divorces, which are instead handled by the general jurisdiction trial court in the state known as the "Supreme Court". New York State's apex court is called the "Court of Appeals".

Complicating Factors

The reality, however, is more complicated than these extremes in most cases. Many states adopt parts of each regime, develop their own special rules, or implement the same basic system of marital property ownership and property division upon divorce in different ways.

Appreciation And Payment Of Carrying Costs During The Marriage

For example, Colorado is not technically a community property state, and community property rights of a spouse in marital property are not recognized during the marriage. But in Colorado, upon divorce, there is a distinction between separate property and marital property that is very similar to that found in community property states. And, in Colorado, while property owned before a marriage is not marital property, appreciation in the value of separate property during the marriage, and income from separate property, is marital property.

Another issue is what payment of mortgages and other costs of maintain real estate that is separate property from funds earned from wages or investments of either spouse during the marriage, will often muddy the waters. California's rule in this situation is non-obvious from general community property principles ands is quite tricky and technical.

California allocates some appreciation of separate property which has had mortgage principal paid for in part from income earned during the marriage or marital property to community property and some of the appreciation to separate property, on a pro-rated basis determined at the time that the property is valued for divorce purposes.

For example, in California, if the home was worth $100,000 net of a $100,000 mortgage at the time of the marriage, and then is then sold free and clear net of costs of sale for $400,000, then $100,000 of the proceeds are separate property, $100,000 of the proceeds are community property, and $200,000 of the proceeds are appreciation that is pro-rated between the two, in this case, evenly. So $200,000 of the proceeds is separate property and $200,000 of the proceeds is marital property. But, taxes, insurance payments, and interest payments as opposed to principal payments, do not add to the community property value of the house, as they are current expenses that don't change the value of the property under California law, even though money is fungible.

In general, some states that distinguish between separate and marital property, or separate and community property, at the time of a divorce, treat appreciation in separate property and payment of carrying costs for separate property as giving rise to some marital or community property interest in that property that is traceable to appreciation during the marriage or income acquired during the marriage, while other states continue to treat property acquired before the marriage entirely as separate property even if it appreciates, and/or even if carrying costs for the property are paid for from income acquired during the marriage.

In states where appreciation in the property and/or payment of carrying costs with income earned during a marriage, gives separate property a partial marital property status, these two factors often convert a house that was originally separate property almost entirely into marital property after a long marriage, while modifying its separate property status only slightly after a short marriage.

In the same vein, different states that distinguish between separate property on one hand, and marital or community property on the other, treat income from separate property earned during a marriage such as rent, interest, and dividends, differently than other states do and sometimes differently than appreciation in the asset itself.

Quasi-Community Property

A third complicating issue is the question of "quasi-community property."

If property is acquired as separate property or community property in a community property state, many states which are not community property states will treaty property acquired or owned by one or more members of the couple while they lived in that community property state as if it were governed by the community property laws of the place where the property is located, or the laws of the place where it was located before it was sold and reinvested in property in the state where the divorce case is being litigated.

Other jurisdictions recognize property acquired while a couple lived in a community property state and its proceeds to retain its community property v. separate property status with a "quasi-community property" doctrine. But, these jurisdictions, rather than applying the community property laws of the state where particular property was acquired, applies a generic set of community property laws to property acquired in any community property state during the marriage.

Sanctions For Economic Waste

Also, in both traditional equitable division regimes that make a separate v. marital property distinction, and in community property regimes, sometimes if the owner of the house that would otherwise be classified as separate property commits "economic waste" that destroys the value of marital property out of spite, or without good cause. When that happens, a court may order that the harm to the marital or community property caused by the economic waste of a spouse be remedied with a contributions from the guilty spouse's separate property.

Marital Agreements

Finally, almost every state allows married couples to modify the property division rules of the state as applied to that couple, in a prenuptial agreement or a postnuptial agreement (collectively, "marital agreements") if it is prepared with the proper disclosures and formalities, and informed consent is given to the agreement.

For example, one of the common terms of a marital agreement (especially for late in life remarriages of widows and widowers, but also in many other cases) states that upon a divorce, legal title to property will be followed strictly when making a property division, with the value of any jointly owned property split exactly equally.

In other words, a marital agreement will often provide that property will be divided upon a divorce in the same way that it would be divided if the couple had never married. This is sometimes called a "yours is yours, and mine is mine" prenup.

Marital agreements like this also often waive any right to alimony to the full extent permitted by law (which economically is almost equivalent to treating the members of the couple as if they had never married) and often waive any inheritance rights of a surviving spouse upon their spouse's death.

2

When spouses separate, each has a right to property division that is governed by provincial legislation. I give three examples, only one of which (British Columbia) excludes a house brought into the marriage from property division. The other two (Saskatchewan and Ontario) give the family home/matrimonial home special treatment for property division and do include it for division, even if it was owned by a spouse prior to the marriage.

A previously owned home is excluded from property division.

If a spouse acquired the house before the relationship between the spouses began, it is excluded from "family property" for the purpose of property division: Family Law Act, s. 85.1

The "family home" is not exempt from property division, even if it was owned by a spouse prior to the commencement of the spousal relationship. There is a presumption that its value will be divided equally, unless a court finds that to be unfair considering extraordinary circumstances or unfair to the spouse with custody of the children. Family Property Act, ss. 22-23.

The value of the "matrimonial home" is never deducted from the value of family property even if it was owned by a spouse on the date of marriage. Family Law Act, s. 4(1).

Québec has two regimes. Before July 1, 1970, the default regime was community of property. Since July 1, 1970, the default regime is partnership of acquests. Spouses could and can choose a non-default regime or otherwise alter the scheme to their specific desires by contract.

But before property division under either regime, the value of family patrimony is to be divided equally between spouses (art 416 CCQ). The family residence is part of the family patrimony (art 415 CCQ). This right cannot be renounced by a marriage contract (art 423 CCQ).


1. For background about B.C.'s change from a "family purpose" model (where property was included for division if it was used for a family purpose) regime to an "excluded property" model (where all property is included unless on a fairly precise "excluded" list, such as pre- and post-relationship property), see the 2010 White Paper on the Family Relations Act Reform. It does not discuss why it was not recommended that the family residence not be always counted as family property.

2
  • Why is BC so different?
    – user0306
    Commented Jun 8, 2023 at 13:31
  • Presumably Quebec follows a French style community property regime, perhaps less modernized than France's itself?
    – ohwilleke
    Commented Jun 9, 2023 at 3:56

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .