Separately owned property does not automatically become marital upon marriage, even when it is placed into joint names. If one party invested separate funds into a marital asset, if they can trace out or prove that investment, they may be entitled to a return of the asset or the amount invested plus appreciation. This is a substantial issue in many cases.
The goal of the tracing process is to link every asset to its primary source, which is either separate property or marital property. Harris v. Harris, 2004
App. LEXIS 138 (2004). See also Mann v Mann, 22 VA. App 459; 470S.E. 2d 605, 1996, holding that the interest passively earned on the husband’s premarital assets are separate. Va.
The Code of Virginia, §20-107.3(A)(1)(iv) defines “separate property” as “that part of any property classified as separate pursuant to subdivision A.3. Code of Virginia, §20-107.3(A)(3)(e) provides that “when marital property and separate property are commingled into newly acquired property resulting in the loss of identity of the contributing properties, the commingled property shall be deemed transmuted to marital property. However, to the extent the contributed property is retraceable by a preponderance of the evidence and was not a gift, the contributed property shall retain its original classification.” (emphasis added). Code of
, §20-107.3(A)(3)(g) provides that section (e) of this section shall apply to jointly owned property. No presumption of gift shall arise under this section where (ii) newly acquired property is conveyed into joint ownership. Virginia
The increase in value of separate property during the marriage is separate property, unless marital property or the personal efforts of either party have contributed to such increases and then only to the extent of the increases in value attributable to such contributions. The personal efforts of either party must be significant and result in substantial appreciation of the separate property if any increase in value attributable thereto is to be considered marital property. See Code ofTracing involves a two-prong, burden shifting test. First, a party has to prove he invested separate property into the real estate, which he did. It is undisputed that all of the money used to purchase the real estate was his traceable separate property. Then the burden shifts to the Complainant to prove, by clear and convincing evidence, that the transmutation was a gift. There is no presumption of a gift that arises from the fact that one party put the real estate in the parties’ joint names. If the party claiming a separate interest proves retraceability and the other party fails to prove transmutation of the property by gift, "the Code states that the contributed separate property 'shall retain its original classification.
, §20-107.3(A)(3)(a). All of the increases of the real estate in this case are attributable to market fluctuations. Virginia
The second issue is the passive appreciation in the value of the jointly titled real estate. Pursuant both to Virginia Code
In the case of Hargrave v. Wienckowski, 2000
If tracing separate property is an issue in a case, records proving the separate ownership are very important. Records include bank accounts, HUDs, deeds, mortgage and payments. Property acquired during the marriage or jointly titled is presumed to be marital without proof of a separate investment or ownership. Of course, the easiest way to resolve this issue is a prenuptial agreement.