DISCLAIMER: THE INFORMATION CONTAINED HEREIN IS SOLEY FOR EDUCATIONAL PURPOSES. IT IS NOT LEGAL ADVICE OR LEGAL AUTHORITY AND IS ONLY THE AUTHOR’S INTERPRETATION OF DIVORCE LAW ON THE SPECIFIC ISSUES DISCUSSED.
In Nebraska, like in many other states, marital property and nonmarital property are key considerations in divorce proceedings, especially divorces with high assets and those involving a family business. The division of property is governed by state law, and Nebraska follows the principles of equitable distribution. While in most cases, courts generally try to divide the net marital estate close to 50/50, do not confuse “equitable” with “equal.” Equitable means “fair,” not equal. In fact, Nebraska law gives courts the discretion to award one party as much as 2/3 of the net marital estate and as little as 1/3, based upon many factors. These concepts will be explored in future Adams & Sullivan blogs. For now, we are sticking to some basics.
Marital Property. Marital property generally includes property that was acquired during the marriage. This general rule is subject to some exceptions, such as inheritance by one spouse or property gifted to a spouse from outside of the marriage. Inherited and gifted property can be set aside to the spouse who received the inheritance or gift, provided, however, the gift or inheritance was not commingled within the marital estate and did not experience any active appreciation during the marriage. (The concepts of active appreciation and passive appreciation are subjects that will be discussed in an upcoming Adams & Sullivan blog).
Net Marital Estate. The net marital estate generally includes all property of the marriage minus all debts of the marriage.
Nonmarital Property and Nonmarital Debts. Nonmarital property and debts, also known as separate property/debts, typically includes assets and debts that were owned by either spouse before the marriage or were acquired through gift or inheritance during the marriage and kept separate from marital assets.
As hinted above, nonmarital property may become marital or partially marital if commingled with marital property, making the distinction more complex. Commingling occurs when separate property is mixed with marital assets or experiences active appreciation during the marriage, potentially leading to the reclassification of the property – in whole or in part. For example, suppose one spouse owned a rental house prior to the marriage. During the marriage, one of the spouses makes improvements to the house, and the improvements cause an identifiable increase in the value of the house, the house might become marital or, at least, partially marital. For example, if the non-owning spouse proves that the improvements increased the value of the house by $50,000, the non-owning spouse will have a claim for one-half of the active increase in value, i.e., $25,000. It is worth noting that it does not matter which spouse made the improvements. The only relevant facts in our scenario are that improvements were made during the marriage, and the appreciation in value is linked directly to those improvements. (Again, active appreciation and passive appreciation will be explored in more detail in upcoming Adams & Sullivan Blog).
Classification of Assets. Asset classification is a crucial aspect of property division. Nebraska follows the principle of equitable distribution, which means that marital property is divided fairly, though not necessarily equally, between spouses. Here are some key points regarding asset classification in a Nebraska divorce:
Commingling. Commingling refers to the mixing of separate and marital property, making it challenging to distinguish between the two. If nonmarital property becomes commingled with marital assets, it may lose its separate status.
Courts may consider factors such as intent, documentation, and the extent of commingling when determining the classification of commingled assets.
Valuation of Assets. The value of each asset is crucial for equitable distribution. Assets may need to be appraised or valued to ensure a fair and accurate division.
Common assets subject to valuation include real estate, retirement accounts, businesses, investments, and personal property.
Three-Step Process in Classifying Marital and Nonmarital Property
The process of asset classification in a Nebraska divorce typically involves three main steps:
First Step: Identification of Assets. The first step is to identify and list all assets owned by the spouses. This includes real property, personal property, financial assets, retirement accounts, investments, businesses, and any other relevant assets.
It is important to distinguish between marital and nonmarital (separate) property during this stage. Marital property is generally acquired during the marriage, while nonmarital property includes assets owned before the marriage or received through inheritance or gift.
Second Step: Valuation of Assets. Once the assets are identified, the next step is to determine their value. Valuation may require professional appraisals, financial assessments, or other methods depending on the nature of the assets.
Common assets subject to valuation include real estate, businesses, retirement accounts, stocks, and other investments. Accurate valuation is crucial for equitable distribution, ensuring that the court has a clear understanding of the overall marital estate.
Third Step: Classification and Distribution. After identification and valuation, the assets are classified as either marital or nonmarital. Marital property is subject to equitable distribution, while nonmarital property typically remains with the original owner.
The court considers various factors, as outlined by Nebraska law, to determine the most equitable distribution of marital assets. These factors may include the length of the marriage, each spouse’s financial contributions, the parties’ economic circumstances, and any agreements or arrangements in place, such as prenuptial or postnuptial agreements.
Throughout this three-step process, it is essential for individuals going through a divorce in Nebraska to seek legal advice from a qualified family law attorney. An attorney can guide them through the complexities of asset classification, ensure compliance with Nebraska divorce laws, and advocate for their rights and interests during the property division process.
It is important to consult with a legal professional to understand how Nebraska’s specific laws and recent developments may apply to your individual case, especially with high asset divorces and those involving the family business. Laws evolve, and legal advice tailored to your situation is crucial when dealing with divorce and property division. This blog is a general discussion only and is not legal advice or legal authority.
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