“I bought a house BEFORE the marriage, and AFTER we’ve been married for a while, I just decided to sell the house so I could use the money to buy a new house. Is the new house marital property?”

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First, it must be pointed out that this question does not include any cat or dog pictures which I believe is somewhat tragic. Notwithstanding that point, as always, the show must go on….

In the case above, where the husband sells a premarital residence and uses the proceeds to buy a new house during the marriage in his name, to preserve the separate property character of the home, the husband must show the exchange of funds from the old house to the new one. Now, this gets a little technical, but it is very important for counsel to not only obtain the necessary proof to establish the initial property as being separate, but also trace that property to try and demonstrate the party is entitled to retain at least some part of its initial form.

In a case where a husband sells a premarital residence and uses the proceeds to buy a house during the marriage in his name, he must show the exchange of funds from the old house to the new one. As always, seemingly innocuous details play a significant role. For instance, if the husband places the new home in joint name, the new house suddenly becomes marital property. However, the analysis does not stop there. If the husband can trace the purchase of the new house to a fund that was held separately, even though the new house is marital, the husband may obtain a “separate property credit.” This credit would be the amount contributed through the separate fund.

Again, in law it seems that very few things can be said without a limitation or a “but in this case.” Staying true to this apparent reality, many courts have limited the concept illustrated above (the “separate property credit”) to real property. In the case where separate funds are deposited into a joint bank account or the name on a separate account is changed to joint name, for example, a court may be reluctant to apply the concept above. One can imagine how such a concept if applied all over the place could create endless litigation with seemingly incomprehensible complexities.

So, the short answer to the question above: yes, the new house is marital property. However, if the New York court applies the separate property credit theory, then the party is nevertheless entitled to a credit that is equal to the amount of separate funds used.  Inevitably, the court will then have to look at the contributions of both spouses. The court could find that while the husband is entitled to a separate property credit, the wife is also entitled to the appreciation of the value of the home where she contributed to the improvements of the house. Bottom line, there is no short answer here and everything is very complicated. Please talk to an attorney who seems to know what he is doing if you find yourself in this kind of situation.

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