In Ohio divorce cases, one of the most common — and misunderstood issues is whether certain assets must be divided between spouses as marital property or whether they should remain with one spouse as that spouse’s separate property. This is especially true when it comes to one spouse’s inheritance. While many people assume “everything gets split,” Ohio law tells a more nuanced story.
Ohio follows an equitable distribution model, which means marital property is divided fairly, but not always equally, based on the circumstances of the parties. But before anything is divided, the Court must first determine what qualifies as marital property and what qualifies as separate property.
In the state of Ohio, “marital property” is most commonly referred to as all real and personal property that is currently owned by either or both of the spouses, all interest that either or both of the spouses currently has in any real or personal property, all income and appreciation on separate property, due to the labor, monetary, or in-kind contribution of either or both of the spouses that occurred during the marriage, and certain retirement plan accounts1.
This can also include property acquired after separation but before divorce, depending on the facts and circumstances surrounding the asset.
With few limited exceptions, “the division of marital property shall be equal.” R.C. § 3105.171. Conversely, a spouse’s separate property is all real and personal property and any interest in real or personal property including but not limited to:
(i) An inheritance by one spouse by bequest, devise, or descent during the course of the marriage;
(ii) Any real or personal property or interest in real or personal property that was acquired by one spouse prior to the date of the marriage;
(iii) Passive income and appreciation acquired from separate property by one spouse during the marriage;
(iv) Any real or personal property or interest in real or personal property acquired by one spouse after a decree of legal separation issued under section 3105.17 of the Revised Code …”
R.C. 3105.171.
In Ohio, spouses in the midst of a divorce proceeding have the ability to agree upon how they want marital assets and liabilities to be divided between them. Specifically, spouses can agree to divide the equity in their home, decide who keeps which motor vehicle, and agree upon how to divide the parties’ marital bank account(s).
In the event that the spouses cannot agree upon how to divide marital assets and liabilities, the divorce may proceed to a trial, in which case the Court will ultimately make the determination of who gets what – and why.
Under Ohio inheritance laws in divorce proceedings, Ohio Courts have consistently found that R.C. 3105.171 “sets forth the general rule that separate property is not subject to division in a divorce proceeding.”2 In other words, if the Court comes to the conclusion that property is one spouse’s separate property, it shall remain with that spouse, not subject to division between the parties.
“In fashioning a property division the court starts from the premise that marital property should be divided equally … with each spouse receiving his or her own separate property.”3 “In general, ‘[t]he separate property is retained by the party who obtained that particular asset regardless of whether the separate property was acquired before or during the marriage…’”4 Again, separate property “specifically includes any inheritance received by one spouse during the course of the marriage.”5
The central mechanism for protecting separate property is whether the alleged separate property is “traceable.” Ohio Rev. Code Ann. § 3105.171(A)(6)(b) provides that "the commingling of separate property with other property of any type does not destroy the identity of the separate property as separate property, except when the separate property is not traceable." R.C. § 3105.171. Traceability is the primary means of determining whether an asset is marital or separate property.6 This is one of the most important concepts in Ohio inheritance laws in divorce cases. "The starting point for tracing the history of the property is determining the source of the funds".7
For example, the evidence in Ruff v. Ruff, demonstrated that one spouse had purchased a number of properties before the date of marriage. The properties were then commingled with marital funds because the parties paid down the existing mortgages during the marriage. Thus, in order to demonstrate that the properties remained separate property, that spouse was required to trace his initial investment to the properties’ present values.8
Another example of an Ohio Court potentially finding a “commingling” of “separate property” would be if a wife took inherited money, deposited it into a joint bank account with her husband post-marriage, and used it to pay for shared household expenses and utilities. If the inherited money was thereafter “untraceable,” meaning the wife could not identify what was inherited and what was marital, then the wife in our scenario could have a difficult time asserting that her inherited money should be considered her separate property, not marital property. As marital property, it would be subject to division between the spouses.
Ohio’s Domestic Relations Courts have consistently held that when a spouse attempting to claim certain property is that spouse’s “separate property,” that spouse bears the burden of proving the same. See Peck v. Peck, holding “[t]he party seeking to have a particular asset classified as separate property has the burden of proof … to trace the asset to separate property.”9 Peck v. Peck, and Dunham v. Dunham, holding “the party seeking to have property declared separate has the burden of proof…”10
Proving that your property is traceable to its premarital or separate source typically requires proof of bank records, estate or probate documents, and account statements tracing the funds over time. Parties also have the option of hiring accounting experts to perform an asset tracing analysis and if needed, provide testimony in Court.
Without clear documentation, even legitimate separate property can be treated as marital.
Protecting your separate property from being divided in your divorce can be much more difficult than it sounds.
Often times, spouses will commingle their inherited assets with marital assets, mixing separate property with marital property. If the separate property is no longer traceable, the Court may deem that spouse’s property as marital, subject to division in a divorce proceeding.
Further, Ohio Courts have consistently found that a spouse may “change separate property to marital property based on actions during the marriage.”11 For example, if a spouse executes a quitclaim deed for a home that spouse received via inheritance, the Court could find that the inherited home is marital, not separate property, if the spouse intended to gift a one-half interest in the real estate to the other spouse. Id.
While one spouse’s inheritance is typically regarded as that spouse’s separate property not subject to division, that protection is not automatic. The way a spouse retains, keeps, and documents his or her assets during the marriage can determine whether they remain separate property, as there are many additional ways in which the Court can deem one party transformed his or her separate property into marital property, subject to division. To protect your interest(s) in your premarital or otherwise separate property, it is always a great idea to keep original purchase documentation of any premarital assets, maintain copies of wills, trust documents, and inheritance letters, to set forth the nature of your inheritance(s), and maintain detailed financial records, like monthly bank statements, invoices, and receipts. This is especially important given the fact that most banking and financial institutions hold on to statements for six (6) or seven (7) years, if not less.
Proper documentation is especially important when dealing with property acquired after separation but before divorce, as classification disputes may arise during litigation.
If you have inherited assets, or expect to receive an inheritance, having counsel who understands Ohio’s separate property landscape early can help you avoid costly mistakes.
Whether you’ve just received an inheritance from a close relative, you’re contemplating divorce, or just want to know more about your rights should your marriage go awry, seeking professional assistance is crucial to ensure your rights are protected.
Plakas Mannos has a team of attorneys dedicated to family law. Contact us today with any Ohio family law questions.
Marietta Pavlidis is a litigation attorney who focuses on family law and workers’ compensation law. Michael John is an associate attorney who also works on our Family Law Team.