In Virginia, before we divide property in divorce, we classify it as either separate, marital, or hybrid.
Separate property is just that – separate – so it is owned by only one party and it is not divided in divorce. Marital property, on the other hand, was either earned, purchased, or acquired during the marriage. Marital property is divided in divorce. Hybrid property is part marital and part separate; this means that you may have owned or had an interest in the asset before marriage but, at some point, the investment in it during the marriage means that the other spouse has at least some interest in it.
Let’s talk about what that means for pre-marital property.
Pre-marital property – property you earned, purchased, or acquired before marriage – is presumptively separate. You don’t need a prenuptial agreement to protect what you owned on the day that you got married. It is yours and it stays yours.
Unless…
There are a few ways you can change the analysis here. Let’s talk about it.
Hybrid Property
Let’s say you own a home. You bought it before you got married, putting down a down payment and then making monthly mortgage payments. Then, you got married. You continued to pay the mortgage from your paycheck. Maybe you even made some improvements.
Even without your spouse specifically contributing anything, it’s a hybrid asset if what you’re using to pay the mortgage is from money earned at your job. If you paid it, say, from your trust fund, from an inheritance, from a separate savings account, or you had a tenant in the house who was paying the mortgage with their rent, it’s probably still entirely your separate property.
Because what you earn during the marriage is marital property, he has an interest in what was contributed from what you earned during the marriage – even if he doesn’t personally contribute any of “his” money to the mortgage, utilities, maintenance, or improvement of the home. This is also true even if his name is not on the deed or the mortgage.
But … what if he did? Well, if he contributed, say, his own separate asset – he received an inheritance from his sweet granny who passed away – and then he invested it in the house, he’d maintain that separate interest too. What’s yours – your down payment and your pre marital contribution – is your separately, but so too is his inheritance.
So, what do you do? Well, if you want to keep the house, you’d have to buy him out. You’d have to qualify for the existing mortgage balance, his portion of the equity, AND his inheritance investment to refi and then pay back his portion to him (or trade off some other asset or investment with similar value).
He could stay, too, if he bought you out and you both agreed, but – because the house was purchased by you prior to the marriage – you’d have the edge, ownership-wise. But that doesn’t mean that he’s NOT entitled to his separate contribution back.
Commingled Assets
You can also convert a separate asset to a shared asset if you commingle it – meaning that you mix it beyond recognition with a marital asset or account. An example? I’d love to.
So, let’s say you have a joint checking account. Then, you get an inheritance. You deposit the inheritance into the joint checking account. Over time, you spend money. You earn money. You pay down debt. You both have your paychecks direct deposited. You go on vacation, you get tax refunds, and you get small gifts of money from family and friends that are all deposited. You order takeout, subscribe to Netflix, and buy groceries. You pay for daycare, you pay for doctors, and you pay for Starbucks on your Target run. You run your life from that account.
Then, once you separate and divorce is pending, you remember the inheritance – and you want it back. The problem is… how do we know whether the existing balance includes the inheritance, or if that was spent already? It’s just one account from which everything comes and goes. Over time, who’s to say that the balance isn’t just regular marital money? It’s too commingled to tell. And we can’t really separate it out and determine which digital dollars coming out of that account went to pay for all of the things.
You probably can’t get it back at this point, even if there is enough in the account to cover what you inherited.
If you want to keep it truly separate, deposit it into a separate account.
Why would money in a bank account be commingled but his contribution to the house wouldn’t be?
We can trace it if it went towards real estate. We can see the proceeds coming from the will or trust documents, going into the real property, and the increase in equity that resulted. The money is still there; the house likely hasn’t decreased in value. If anything, it has increased. We can still find that money.
In a bank account, it doesn’t work that way. Who’s to say what dollars went to pay for what? It’s just too messy to divide it out.
It is possible he’d agree to just give you back your inheritance? Maybe. You can do almost anything in an agreement. But I don’t think it’d be a winning argument in court to suggest that you should be able to separate out your inheritance from a joint account.
Separate property is usually pretty safe, but you do have to make smart choices with it. Keep your separate assets as separate as possible. Don’t commingle with marital accounts – unless you’re cool with the possibility of losing it.
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