Are Premarital Assets Protected in Divorce?

Divorce is a complex process with a host of potential obstacles. One major point of contention in nearly every case is property division. In fact, some couples delay divorce because they feel they may lose significant portions of their property and struggle to gain financial independence.

If you are considering filing for divorce, you may be concerned about:

  • How to divide property you obtained during the marriage; and
  • What will happen to the property you had before getting married.

How divorce may affect your property depends on where you live, when you acquired the property, what marital agreements are in place, and how you and your spouse feel about each asset. If these issues cannot be resolved through negotiation or mediation, they must be resolved by a court of law.

How Property Is Divided During Divorce

The first step in a divorce action is to determine whether your property is marital or nonmarital (i.e. separate property). Separate/nonmarital property includes all premarital property, gifts, and inheritances, including any appreciation that accrued during the marriage. Marital property, on the other hand, includes all property obtained during the marriage, and it must be divided equitably. If you and your spouse create a property division agreement for your marital property, the court will need to review it to ensure it is fair to both parties.

The judge will consider a wide variety of factors when establishing a property division arrangement, including:

  • How long the marriage lasted
  • Age and health of each spouse
  • Occupations of each spouse
  • Financial circumstances (e.g. income, debts, etc.)

The appropriate way to divide property, however, may not always be clear. Some property, for example, may have been acquired before the marriage but augmented during the marriage. Another possibility is that property acquired prior to the marriage was used to benefit the marriage (i.e. buying a home in both parties’ names using separate property funds). These scenarios require a more complex analysis.

Separate property is usually awarded to the party that initially obtained it, with three exceptions:

  1. Premarital property has been commingled with marital property;
  2. One spouse has augmented, maintained, or protected the other spouse’s separate property (also called the contribution theory); and/or
  3. Extraordinary situations demand unique division methods.

Commingling Marital Property

Separate or premarital property becomes commingled when it is combined with other marital property and, in the process, completely loses its identity. If you convert property from one investment medium to another, it may still be considered premarital property, so long as it remains separate and identifiable.

The Contribution Theory

Under the contribution theory, a judge may award portions of one spouse’s separate property to the other spouse if the judge recognizes direct involvement or financial expenditures toward the other spouse’s property. Under Utah law, simply taking on household or family responsibilities while the other spouse works towards increasing the separate property’s value (i.e growing a business) has been rejected as a standalone basis for awarding separate property to the other spouse. Active participation and contribution are required for the nonowner spouse to receive separate, nonmarital property. These contributions must include concrete benefits for the property or business interests.

Extraordinary Circumstances

The bar for establishing an extraordinary situation is high. Traditionally, sharing the spouse’s separate property is the only way to achieve equity. In most cases, a party must be allowed a reasonable return on premarital capital before a judge concludes that the increase in value occurred during the marriage and, therefore, qualifies as marital property.

One scenario where the court may create an equitable division of separate property is when a spouse owns separate property but lacks the income needed to provide alimony. In this case, the court may solve the problem by awarding the nonowner-spouse part of the separate property in lieu of alimony. Another example is when one spouse increases the value of the marital estate while the other is working to increase the value of their own separate property. In that situation, without an equitable distribution, one spouse would benefit from the other’s work while the other spouse would not. In this situation, division of separate property is a fair solution for both parties.

Contact Our Firm for Additional Questions and Support

If you need more information about what will happen to your property in your divorce, speak with our attorneys at Carr | Woodall. We understand what you are going through and will advise you on what to expect in your specific circumstances. Our divorce attorneys have handled thousands of cases, many of which have involved claims of separate property.

We will help you protect what is yours. Schedule your consultation or call (801) 988-9400 to speak with our dedicated legal team.

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