“What’s mine is yours, and what’s yours is mine.” Well, sort of. When you divorce in Alaska, property acquired during the marriage is presumed to be marital, and property brought into the marriage or acquired through gift or inheritance is presumed to be premarital or otherwise nonmarital. However, there are circumstances that can cause premarital property to become marital. That’s what I’m hoping to address in this blog post.
When you are married, the presumption is that the two of you are acting as a joint economic unit. Thus, when you buy property while married, property like cars, boats, houses, stocks, bonds, etc., no matter whose name is on the title these items are presumed to be marital. The same goes for retirement accounts, pension plans, and other employee benefits. If you acquired employee benefits during marriage, they’re likely marital property. Did you start your business while you were married? The appraised value of that business is probably marital too. Same goes for liabilities such as credit card debts, student loans, auto loans, mortgages, and the like.
Why is this important? Because in a divorce only marital property (and debts, don’t forget those!) is subject to division by the court.*
Now let’s say you came into the marriage with substantial assets. Let’s say you bought a house before you met your significant other. A client once said to me during a consultation, “I owned my house before we got married, but I guess the day he moved in it became half his.” Not quite. Not by a long shot, actually. Alaska is fairly protective of a divorcing party’s separate or premarital property, and the burden is on the non-owning spouse to prove that the premarital property transmuted (i.e. transformed) into marital property. This happens though something called “implied interspousal gift,” and while the law on this issue has evolved over the decades, the Alaska Supreme Court has really tightened the evidentiary standard in recent years.
We use “implied” because interspousal gifts are rarely explicit. You don’t often see a signed agreement where one spouse writes “I hereby give you half of my house, because everything that’s mine is yours.” That would make things pretty easy. By the way, simply putting the other spouse’s name on a title doesn’t necessarily mean the owning spouse gifted an ownership interest. Is it strong evidence? Sure. In fact, it’s presumptive evidence that shifts the burden to the owning spouse to prove they didn’t intend to make the asset marital property. However, courts have found that transferring title for some other reason, say for tax purposes or to avoid a judgment being placed on the property, is not necessarily an “interspousal gift.”
What’s often the case is that courts have to infer the intent of the party who owns the premarital asset. Courts call this “donative intent.” That is, the owing spouse intends to donate the asset to the marital unit. The court infers a party’s intent through evidence and testimony. To keep things simple, let’s stick to the example of a house. Let’s say Sally owns a house before she married Bill, and because Bill was renting, Bill moves in and they use Sally’s house as the marital residence. This alone does not mean that Bill has acquired an ownership interest in Sally’s house. What is evidence that Sally intended to donate the house to the marital unit? Here are some examples:
- Sally places title in joint ownership. This is an obvious one and a big one, but as discussed earlier, it’s not dispositive.
- Bill contributes to the mortgage payment and Sally could not otherwise afford the mortgage without Bill’s contributions.
- Sally refinances the house using Bill’s credit.
- Bill makes major remodels or repairs that significantly increase the value of the house, and Sally does not pay Bill for the work.
These are just a few examples, there are many factors you should discuss with your lawyer. I used a house as an example, but keep in mind this analysis can apply to nearly any premarital property, including vehicles, boats, retirement accounts, businesses, etc. If you and or your spouse own premarital assets and you have questions or concerns about those assets possibly transmuting to marital property, please feel free to call us and set up a consultation with one of our family law attorneys!
* Of course there’s an asterisk. Isn’t there always an asterisk? There is something called “invasion of separate property,” but I won’t get into that here because it rarely happens. Feel free to ask me about it later.