One divorce issue that can be complicated and sometimes contentious is property division, especially when one spouse asserts that he or she owns “separate property” not subject to division.
Separate property gains the designation of “separate” by being:
- Owned before marriage by one party
- Received by one party through inheritance
- Gifted to one spouse
Separate property remains in the possession of its owner after divorce, while the court equitably divides marital property. Nonmarital or premarital property can lose its designation as “separate property” by being transformed into marital property. This may happen by the commingling of the separate property with marital property or by efforts enhance the value of separate property during marriage.
If a party can “trace” a straight line from a premarital asset to a marital asset at divorce, the current separate asset may still retain its character as separate. For example, if the owner sold a premarital asset and deposited the proceeds into an account the other spouse never touched and into which no marital funds were deposited, a court could trace the funds in that account at the time of divorce to the premarital asset.
Nature of farming assets
The nature of farming is seasonal and cyclical. Farmers regularly sell assets like crops, livestock and equipment and reinvest the proceeds into the same or other agricultural assets. Keeping track of the premarital or separate nature of proceeds and where they were reinvested is complicated and people may not even be aware of any reason to keep track of such reinvestments; working a farm and raising a family is work enough for any person. But later, should divorce come to pass, reconstructing the financial trail, to discern the nature of a farm asset, can be difficult to impossible.
Supreme Court example
In the Supreme Court of Nebraska in the 2016 case of Brozek v. Brozek, the court said that the husband did not show that three assets remained premarital:
- Premarital money in the farm checking account: Accurate tracing of the premarital funds was not possible because the wife had been added to the account during marriage and the judge had no evidence of deposits and withdrawals during marriage.
- Crops from the harvest just before marriage: Even though husband rolled premarital harvest proceeds into subsequent crops and repeated this throughout the marriage, he could not show the actual number of bushels sold and the premarital harvest proceeds were “mixed with the proceeds of marital harvests and subject to the vicissitudes of the farming economy for nearly 20 years.”
- Farm machinery preowned before marriage: Husband could not trace the proportion of current machinery value attributable to proceeds from premarital equipment sales. Court refused to characterize all the machinery as a group asset with one value in the way a cattle herd had been allowed to keep its premarital nature in a previous case. Even though the actual premarital cows had been sold for slaughter, the herd was self-sustaining through reproduction and was treated as a single, premarital asset.
If you are worried about the commingling of assets in the context of a farm divorce or any other instance where premarital assets are at issue, an experienced Nebraska family law lawyer can answer questions about the nature of such property in divorce.