Undoing Mixing of Premarital and Marital Assets in Oregon Divorce

Oregon divorce law focuses on when property was acquired in deciding how to divide it. Usually, property acquired during the marriage is considered marital property, and property acquired beforehand is not. The law presumes, very strongly, that both spouses contribute equally to marital property, and that contribution can be other than financial. As a practical matter, usually the courts will split marital property into equal totals and back out premarital property. One problem that sometimes arises is what to do with mixed marital and premarital assets. A recent cause illustrates how this is handled, and unfortunately it may require some expense for experts to work out the values.

The husband sold property that he owned before the marriage to buy a house for himself and the wife, and paid the taxes out of the inheritance he had used to buy the other property. During the marriage, however, both spouses lived in the house and the wife claimed to have invested in improvements. When they divorced, they agreed that the house was generally premarital property, but the wife asked for a credit based on her investment in it.

Where, as in this situation, it can be shown that marital property was acquired solely though the efforts of one spouse (and use of premarital assets for the purchase is one of the few ways to do it), Oregon courts are supposed to work out how much each spouse contributed, financially and non-financially. In the case in question, unfortunately, the trial judge simply made a rough ruling of one-quarter to the wife, so the Court of Appeals sent the case back for a new hearing.

Washington’s community property system usually results in roughly similar results through a similar but not quite identical analysis. Property acquired during the marriage is considered community property, and property acquired before is considered separate. Investments and commingling may result in a mixture of separate and community values. The overall result is to have a fair distribution, which usually, but not always, will involve a split of community property and backing our of separate property.

Proving the value of each spouse’s contribution will usually require an expert’s opinion, and will probably need a review of all of the documentation of financial contribution from premarital and marital sources. (One of the few exceptions are traditional pensions, which can usually be analyzed by straightforward application of the time the spouse was employed before and during the marriage. 401(k)’s and similar plans, however, will require accountants to work out contributions and growth.) Depending on the complexity of the analysis, this may be fairly expensive, and may only be cost-effective for more expensive assets. People who may face this situation in a divorce should probably talk to a lawyer about the potential value of the contribution and what the necessary proof might cost before deciding how much to invest in resolving that issue.

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