Property Division Post Nuptial Agreement

[yarnaholic1963]

What is the name of your state (only U.S. law)? Texas
Married for 5 1/2 years
Ex filed over 60 days ago

My soon-to-be-ex and I are TRYING to come to an agreement regarding division of assets without going to court . Four years ago (after we'd been married for about a year and a half) I sold the house I'd been living in for 10 years before I met my ex and took the proceeds from the sale of the house and paid cash for a condo (about $45K at the time, now valued to be about 60K per the tax assessor). I had my ex sign a post nuptial agreement stating that if we should ever divorce, he would not go after my condo, however 4 years later I am unable to find it. So far, he has agreed not to go after the condo, but now that we've hit a wall regarding other joint assets, I'm wondering if we should end up having to go to court to let a judge decide, would the judge still consider the condo community property if he should pursue it? My attorney is aware of the condo, but she was rushed when we met and didn't really tell me regarding what she thought about the possibility of me losing it. Apparently this is family law dead week in the state of Texas so she has been unavailable to answer questions, but I will meet with her about this when dead week is over. Until then, I'm hoping to get some advice, as I've been a nervous wreck about this. My question is, should I agree to let go of the issues that he won't budge on so that I don't have to worry about losing my condo or would a judge award me the condo?

Thanks in advance!

 

[LdiJ]

What is the name of your state (only U.S. law)? Texas
Married for 5 1/2 years
Ex filed over 60 days ago

My soon-to-be-ex and I are TRYING to come to an agreement regarding division of assets without going to court . Four years ago (after we'd been married for about a year and a half) I sold the house I'd been living in for 10 years before I met my ex and took the proceeds from the sale of the house and paid cash for a condo (about $45K at the time, now valued to be about 60K per the tax assessor). I had my ex sign a post nuptial agreement stating that if we should ever divorce, he would not go after my condo, however 4 years later I am unable to find it. So far, he has agreed not to go after the condo, but now that we've hit a wall regarding other joint assets, I'm wondering if we should end up having to go to court to let a judge decide, would the judge still consider the condo community property if he should pursue it? My attorney is aware of the condo, but she was rushed when we met and didn't really tell me regarding what she thought about the possibility of me losing it. Apparently this is family law dead week in the state of Texas so she has been unavailable to answer questions, but I will meet with her about this when dead week is over. Until then, I'm hoping to get some advice, as I've been a nervous wreck about this. My question is, should I agree to let go of the issues that he won't budge on so that I don't have to worry about losing my condo or would a judge award me the condo?

Thanks in advance!

You can prove that the initial 45k investment that you made in the condo was pre marital and was made with separate assets. Therefore, the only portion that might be at risk as a marital asset would be the potential 15k increase in equity since then.

 

[yarnaholic1963]

The condo was purchased after we'd been married for a year and a half, not before we were married.

 

[LdiJ]

The condo was purchased after we'd been married for a year and a half, not before we were married.

Okay, but you can still clearly demonstrate that it was purchased with separate assets...so that does not change the picture. Its the appreciation only that is a marital asset.

 

[adjusterjack]

The condo was purchased after we'd been married for a year and a half, not before we were married.

When you sold the house what did you do with the $45,000? Did you put it in a joint account prior to buying the condo? That could be an issue.

When you bought the condo did you buy it with both your names on the deed?

If yes to that question, then the condo is community property (by ownership) and you gave him a gift of half that $45,000 plus half the appreciation of market value.

If the condo is in your name only and you didn't commingle the $45,000 with marital funds then there is a good chance that only the increase in value is community property as Ldij suggests.

 

[LdiJ]

When you sold the house what did you do with the $45,000? Did you put it in a joint account prior to buying the condo? That could be an issue.

When you bought the condo did you buy it with both your names on the deed?

If yes to that question, then the condo is community property (by ownership) and you gave him a gift of half that $45,000 plus half the appreciation of market value.

If the condo is in your name only and you didn't commingle the $45,000 with marital funds then there is a good chance that only the increase in value is community property as Ldij suggests.

I am going to disagree a bit. There have been many attorneys from community property states who have had the opinion that if separate assets can be tracked, that they can still be treated as separate...such as separate assets buying property, even if both names were on it.

 

[yarnaholic1963]

The money was put into a separate account and the condo is in my name only.

 

[Just Blue]

Px Hx******************************************.....

 

[latigo]

The money was put into a separate account and the condo is in my name only.

Then as long as you can trace the purchase to separate funds it retains the same character. Property taken in exchange for separate property is not per se transmuted into marital or community property.

But totally misleading is this business of you being told that the appreciated value of the condo, that is, from time of purchase to the filing of the divorce complaint, is marital or community property in which your husband has a 50% vested interest.

It would only be true if your husband could prove (and it would be his burden of proof) that the increased value is due to his or your efforts or contributions from other community property. In that sense the increase would be considered active and would be a part of the community estate

On the other hand, where the enhanced value is due solely to inflation and other market forces, that is, independent of the efforts by either party or contributions from community property, then the increase is said to be passive, remains separate property and is not part of the community estate.

 

[latigo]

Then as long as you can trace the purchase to separate funds it retains the same character. Property taken in exchange for separate property is not per se transmuted into marital or community property.

But totally misleading is this business of you being told that the appreciated value of the condo, that is, from time of purchase to the filing of the divorce complaint, is marital or community property in which your husband has a 50% vested interest.

It would only be true if your husband could prove (and it would be his burden of proof) that the increased value is due to his or your efforts or contributions from other community property. In that sense the increase would be considered active and would be a part of the community estate

On the other hand, where the enhanced value is due solely to inflation and other market forces, that is, independent of the efforts by either party or contributions from community property, then the increase is said to be passive, remains separate property and is not part of the community estate.

Adding authorities below noting that the passive and active rules applies equally in community property states where the parties share equally in assets acquired during the marriage and in common law states where the issue arises in the equitable division of marital property. Non-marital property is said to be immune from such division.

Elam v. Elam, 97 Wash. 2d 811, 650 P.2d 213 (1982)
Passive increases, those increases caused by inflation, appreciation or other market forces not attributable to either party’s efforts, which relate to the sole and separate property are themselves sole and separate property, unless the non-titled spouse can prove that he or she contributed to the increase. Also, Plachta v. Plachta, 118 Wis. 2d 329, 348 N.W.2d 193 (Ct. App. 1984)

DeHaven v. DeHaven, No. 0997-96-4 (Ct. of Appeals Apr. 8, 1997)
If spouse proves that passive factors account for a portion of the increase in the value of his stock, such increase cannot be properly classified as marital property. Similarly, where third parties contribute to the increase in value of separate property, the marital portion is to be reduced proportionately. The increase classifiable as marital should reflect only that attributable to the parties’ personal efforts and not those of others or passive factors.

Mothershed v. Mothershed, 701 P.2d 405 (Okla. 1985)
Passive increases, those increases caused by inflation, appreciation or other market forces not attributable to either party’s efforts, which relate to the sole and separate property are themselves sole and separate property, unless the nonemployee spouse can prove that he or she contributed to the increase

McLeod v. McLeod, 327 S.E.2d 910, cert. denied, 333 S.E.2d 488 (1985) Passive appreciation of inherited property or that brought into the marriage invariably remains separate property.

Van Newkirk v. Van Newkirk, 325 N.W.2d 832 (1982)
Passive increases, those increases caused by inflation, appreciation or other market forces not attributable to either party’s efforts, which relate to the sole and separate property are themselves sole and separate property, unless the nonemployee spouse can prove that he or she contributed to the increase.

In re Marriage of Herr, 705 S.W.2d 619 (Mo. Ct. App. 1986)
Passive increases, those increases caused by inflation, appreciation or other market forces not attributable to either party’s efforts, which relate to the sole and separate property are themselves sole and separate property, unless the nonemployee spouse can prove that he or she contributed to the increase

Minn. Stat. Sec. 518.54, subd. 5 (1998)
Marital property includes all property acquired during the marriage. Nonmarital property includes all property acquired before marriage and the increase in value of that property.

"Increases in the value of nonmarital property due to the entrepreneurial decision-making efforts of one or both spouses during the marriage are considered marital property. But increases in value of nonmarital property remain nonmarital if shown to be attributable solely to market forces or conditions, such as simple appreciation in value of an asset. Upon dissolution, a spouse is entitled to receive the original nonmarital asset and any passive appreciation in value." (Quoted from a blog on the subject. No citations given. Another of same blindly declares that the passive/active rule applies in Texas. Also another for California, but again no cases cited as there seems to be a paucity of decisions on the subject.)

 

[LdiJ]

Repairs and maintenance on the property, property taxes, homeowner's association fees, home owner's insurance and any other necessary expenses paid out of marital funds would make the appreciation marital property. All of those things must be paid to protect the property and the ownership of the property.

Now, lets say that you had a rental property, and the rent covered all of the necessary expenses. In that instance no marital property was used for any of the expenses therefore the appreciation would remain separate property.