Many couples live together for years before deciding to tie the knot. During long periods of premarital cohabitation, what happens when couples mingle finances or contribute to the value of each other's assets? What if most assets are in the name of only one spouse?
In Virginia, marital property and debts are divided in divorce under a system called “equitable distribution.” The equitable distribution of marital property is based on the philosophy that marriage is an economic partnership and, upon its dissolution, each partner should receive a fair portion of the property accumulated during the marriage. This concept generally does not extend to assets accumulated by one of the future spouses before the wedding. If property is acquired before the date of marriage and titled in the name of only one of the spouses, it is presumed to be separate property, not subject to division in a divorce.
If a court is asked to divide assets in a divorce, one of the factors considered is the length of the marriage. The length of the marriage does not include premarital cohabitation. However, the court may consider the parties' monetary and nonmonetary premarital contributions if those contributions affected the value of marital property. The key is that the property must be marital, and the non-owning spouse must show a link between his or her actions and an increase in its value.
For instance, the couple may live in a home purchased by Wife before the marriage and titled solely in Wife’s name. Both participated in the house-hunting and selected the property with the idea that they would live there together. Throughout their cohabitation, Husband helps with routine maintenance, upkeep, and cleaning, perhaps buying some paint or supplies for minor repairs. At some point, they marry and then separate soon thereafter. In this scenario, Husband’s contributions are probably not going to be enough to entitle him to compensation if they divorce because they did not have much impact on the value of the house.
However, if one spouse's separate property substantially increases in value during the marriage, as a result of significant personal efforts of either spouse, that increase in value is considered marital property. Let’s say that, for example, there is a mortgage on Wife’s home, which is paid during the marriage with either spouse's earnings during the marriage. Those mortgage payments may enable Husband to argue that the property changed from separate property to part-marital, part-separate This may give him, the non-owning spouse, the right to be compensated for a portion of the equity in the home.
When the separate property of one party is commingled into the separate property of the other, each should be reimbursed the value of his or her contribution, assuming that they can trace the contribution and it is not considered a gift. An example would be if the Husband contributed to the down payment for the house purchased by Wife before the marriage.
If you and your spouse are separating, talk to one of our Culpepper family law attorneys about the impact of financial transactions during premarital cohabitation.