08/11/2023
How is Premarital Property Distributed at Time of Divorce?
It is common for one party to own a house before marriage, that house is considered a pre-marital asset. The owner of the house will retain ownership after the divorce. However, the party who owns the house will not have the benefit of 100% of the increase in value during the period of the marriage. It is often thought that any increase in value in the property will be divided equally between the parties. For instance, if a house is worth $100,000.00 at the time of marriage and $200,000.00 at the time of divorce, then the parties will split $100,000.00 which represents the increase in value of the property. The reality is a bit more complicated.
The controlling factor in determining the marital portion of a premarital asset is the amount of equity in the property. Of course, the value of the property helps determine how much equity there is, but any mortgage or other encumbrance on the property must also be considered. In determining the value of the marital estate, the Court will determine the amount of equity in the property at the time of marriage and the amount of equity at the time of divorce. While it sounds simple, it can be complicated by the fact that couples borrow against the value of a property, and while the total value is likely to increase, it is possible that the equity will decrease. Inevitably the owner of the property thinks he or she is entitled to retain the entire value of the increase in equity. This is simply not the case in the absence of a prenuptial agreement.
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