Is it yours, mine or ours? Navigating the labyrinth of separate and marital property.

Oklahoma law provides for an equitable division of marital property and marital debts.  That seems straightforward, but it can be complicated to identify exactly what is marital.  The easiest bright line rule is property accumulated before marriage.  If you had it before your marriage, and you did not change sole ownership to joint ownership, most likely the property is separate and therefore not subject to division in divorce.  For real property, this can be tricky.  If you owned the property before marriage, but later changed title to joint ownership, a presumption arises that you intended to gift the separate character of the property to your spouse.  In other words, by changing title to joint ownership, you intended to change the the property from separate to marital as a gift.  You can rebut that presumption, but it takes more than he said/she said evidence.

Property owned before marriage can have both separate and marital components.  If real property is improved using marital funds, then the enhanced value of the property is marital.  For example, a house increases in value after adding a pool and sun deck.  The house was worth $150,000 before the improvement and $180,000 afterwards.  If the house was owned by one spouse before marriage, but the couple used money earned during marriage to add the pool/deck, then the $30,000 increase in value is marital, but the original $150,000 value remains separate.  Paying down a mortgage using marital funds is another aspect of enhancing value.  Suppose a house had $30,000 of debt at the time of marriage.  Subsequently, that debt was paid off during marriage, using money earned during marriage.  The house is now worth $30,000 more to the couple, and that $30,000 increase of value is marital property.  As you can see, even the simplest of rules for distinguishing between separate and marital property can be complicated.

Property received by gift or inheritance is another separate/marital distinction.  This type of property is considered separate.  Suppose your grandmother wants to gift mineral interests to you.  Assuming the gift results in title transfer to your name only, the mineral interests would be separate property, not subject to division in divorce.  But let’s say you go out and build a well on the property, using your own two hands, because you have the skill to do that kind of work.  The property increases in value due to your hard work.  The increase in value is marital.  This concept is referred to as “joint industry” or the active efforts of either spouse.  Increase in value resulting from joint industry is marital property.  Ok, so what if you don’t do anything to the property, but an oil boom increases it’s value without your active efforts.  Is the increase in value marital?  Probably not.  This is what we call a “passive increase of value.”  The increase in value stems from market factors outside your control.  Therefore, the increase is not from joint industry, and it is not marital.

There are lots of rules for distinguishing between marital and separate property.  I can’t go over all of them in this post.  However, I hope you get a general sense for how distinctions between marital and separate property work.

Marital debt works in much the same way.  If the debt was contracted during marriage, it will most likely be considered marital debt.  I have clients who get flabbergasted when a credit card in one spouse’s name is treated as marital debt.  “That’s her card!” they say.  Interestingly, the name attached to the debt is not what makes it separate or marital.  If you’re worried about a spouse running up credit cards, or contracting other debt without your knowledge, it would be a good idea to sit down and review a credit report.  The debt, even while titled in one spouse’s name, and incurred without the other spouse’s knowledge, could still be divided by the court between spouses.

Student loans are one potential exception to this rule.  Presumably, student loans are for education which increases earning power.  After divorce, only one spouse will benefit from increased earning power funded by student loans.  As only one spouse benefits from the fruits of this debt, the court will likely order that incurring-spouse to pay the student loans.  Bear in mind, the court is not required to assign student loan debt to the spouse benefiting from it.  That is just the way it typically works out as the “equitable” way to treat that debt.

As stated above, an exhaustive description of all rules for distinguishing between marital and separate property or debt would be impractical if not impossible.  If your case involves issues on whether property is separate or marital, your best bet is to consult with a competent attorney.  I just happen to know of such an attorney.  Call Burr Law Offices today to discuss how we can help you with your property/debt division divorce case.