By David L. Duff of Duff & Kronfeld, P.C. posted in Family Law on Friday, June 29, 2018
Bob owns a house in his sole name. Bob meets and falls in love with Susan. They eventually marry and live as husband and wife in the house that Bob owns. During the marriage, Bob and Susan pay the mortgage and other house-related costs, from money that they earn from their respective jobs. After 15 years, their marital bliss soured and Bob and Susan became embroiled in a divorce. Bob’s pre-marital house has almost doubled in value during their marriage.
Sally owns a house in her sole name. Sally eventually decides to marry Tom, and soon thereafter becomes pregnant with twins. They decide to renovate the house with an addition for the nursery, new windows throughout, upgraded bathrooms and updated kitchen appliances and cabinets, as well as granite countertops. They decide to use the money that Tom recently inherited in order to pay for these renovations. Unfortunately, Sally and Tom eventually found themselves in a divorce fight.
Quere . . . Under each of the above scenarios, what happens to the house?
In Scenario #1, Bob’s house is his “separate” property, as he owned it prior to marrying Susan. This house remained his separate property throughout the marriage, as he never took any steps to make it “marital” property. The mortgage, and utilities and maintenance costs were all paid with money that had been earned during the marriage, i.e., “marital” funds; however, doing so does not change the classification of the house as being Bob’s “separate” property. At the final divorce hearing, the appreciation in value of Bob’s separate asset, i.e., the house, will belong to him. The only “marital” component that Susan would share in, would be the amount by which the mortgage principal was paid down during the marriage.
In Scenario #2, Tom contributed his “separate” money from an inheritance, to renovate and improve Sally’s “separate” property, i.e., her pre-marital house. While extremely generous of him, such contribution did not give Tom any ownership interest in that house, which remained Sally’s “separate” property. At the final divorce hearing, Tom would have to present expert testimony from a real estate appraiser as to the increase in value, if any, that the renovations brought to Sally’s house; and, the harsh reality is that $100,000 spent on house improvements seldom results in a $100,000 increase in value.
The lesson to be learned is this: Before you agree to spend marital funds, or your separate funds, on expenses associated with a house, make certain that you actually have an ownership interest in that house.
If you have any questions or would like to discuss your legal matter with an attorney, please contact Duff & Kronfeld, P.C. at (703) 591-7475 for a complementary, 30-minute consultation.