One of the questions I frequently hear in divorce cases is: "I owned my house before I got married. Does my spouse get part of it?" Maybe.
Property you owned before your marriage is generally treated differently from property you acquired during the marriage. But when we're talking about a house that became the marital home, the answer can get complicated.
Owning the house before you got married doesn't necessarily end the analysis.
Generally, property you owned before your marriage isn't subject to equitable distribution simply because you later got married.
So if you purchased a house several years before meeting your spouse, brought that house into the marriage, and continued owning it, you may have a strong argument that the premarital property is yours. But then we have to look at what happened during the marriage.
Did you add your spouse to the deed? Were marital funds used to pay down the mortgage? Did your spouse contribute to major renovations? Did the house increase in value because of improvements or efforts made during the marriage? Was the house actually purchased shortly before the wedding in anticipation of your marriage?
Those facts can matter.
Suppose you bought your house five years before getting married.
When you got married, there was still a $300,000 mortgage on it. During the next 15 years, the mortgage was paid down substantially using income earned during the marriage.
That doesn't necessarily mean your spouse suddenly owns half of the entire house. But it also doesn't mean you can simply say: "My name was on the deed before we got married, so my spouse gets nothing." New Jersey courts may examine the increased equity created by paying down mortgage principal during the marriage.
That's one reason we need to know more than who originally bought the house. We need to look at the numbers.
This is another important distinction.
Suppose your house was worth $500,000 when you got married and is worth $900,000 when you divorce. Where did that additional $400,000 come from?
If the house simply increased in value because the real estate market went up, that's different from an increase caused by significant work or contributions made during the marriage.
For example, perhaps your spouse personally performed substantial renovations, managed a major addition, or otherwise contributed to increasing the property's value. The source of the appreciation can matter.
So don't automatically assume that every dollar of appreciation is marital. And don't automatically assume that every dollar is separate.
This can create a much bigger issue.
If you owned the home before the marriage and later transferred title so that you and your spouse owned it jointly, the circumstances surrounding that transfer need to be examined carefully.
Why did you do it? What did you intend? What happened to the property afterward?
Changing title can create significant equitable-distribution issues, so if you own a premarital home and are considering adding your spouse to the deed, understand the potential consequences before doing it.
And if you're already getting divorced and your spouse's name was added years ago, don't assume that the original premarital ownership automatically resolves the issue.
You'll sometimes hear lawyers talk about "commingling" separate and marital property.
The basic idea is that property that started out separately owned can become more complicated when it's mixed with marital property or treated as part of the marital financial partnership.
But commingling isn't simply a magic word that automatically converts an entire premarital asset into marital property. The facts and the parties' intentions matter.
With a house, we may need to examine the deed, mortgage history, source of payments, renovations, refinancing documents, financial records, and how the parties treated the property throughout the marriage.
Timing can also matter.
Suppose you purchased a home several months before your wedding specifically because you and your future spouse planned to live there together after getting married.
Maybe you selected the house together. Maybe both of you contributed in some way to acquiring or improving it. Maybe the only reason one person's name appears on the deed is because the purchase closed before the wedding.
New Jersey courts have recognized that, under appropriate circumstances, property acquired before the wedding in contemplation of marriage may be treated differently from an ordinary premarital asset. Again, the date on the deed isn't always the entire story.
The stronger premarital-property situation is generally one where the ownership is clearly established and well documented.
If you bought the house many years before the marriage, built substantial equity before getting married, kept title in your own name, and can document its value and mortgage balance around the time of the marriage, those records can become extremely important.
Why? Because even if there is ultimately a marital component, we may still need to distinguish the value you brought into the marriage from value created during it. That becomes much harder if nobody knows what the property was worth when the marriage began.
If you owned your home before marriage and divorce is now a possibility, start looking for documentation.
Useful records may include:
The more clearly we can reconstruct the financial history of the house, the easier it is to evaluate what may or may not be subject to equitable distribution.
If you owned your house before getting married, that fact is important. But don't stop there.
We need to know what the house was worth when you married, how much equity you had, what happened to the mortgage, whether marital money was invested in the property, whether either spouse contributed to increasing its value, whether title changed, and how the property was treated throughout the marriage.
Sometimes the answer may be that the house remains largely or entirely separate. Sometimes there may be a marital interest in part of its value. And sometimes the history of the property makes the answer considerably more complicated.
If a premarital home is one of the significant assets in your divorce, gather the records before making assumptions about what either spouse is entitled to receive.
If you're preparing for divorce and want to better understand how New Jersey treats property, finances, and the other decisions ahead of you, my free Divorce Smarter Course will walk you through the major issues involved in a New Jersey divorce.
Until next time,
Steve