Many of our clients are surprised to learn that Oregon is not a community property state like its adjacent neighbors, California and Washington. Instead, Oregon has complicated property distribution laws when it comes to divorce. If you are contemplating a dissolution of your marriage, you should know your rights regarding your property, including any real estate, closely-held business, stocks, retirement accounts, etc. that you brought into the marriage and whether they will remain your property upon its dissolution.
THE PRESUMPTION OF EQUAL CONTRIBUTION
Oregon’s domestic relations laws provide that any assets acquired during a marriage, including appreciation of pre-marital assets, are considered to be marital property. This is generally true regardless of how title is held. Marital property is presumed to be owned equally by both spouses unless one spouse can prove otherwise. Thus, upon dissolution, each spouse would receive an equal share of the asset. For example, if you owned a closely-held business prior to marriage, this asset would be considered a “premarital asset” and not be subject to distribution. However, your spouse may be able to make a claim for a share of the value of any appreciation of the business if he/she made any economic or non-economic contributions to such appreciation. The most common non-economic contribution is that of a homemaker spouse. In that case, a “stay-at-home” mom or dad would be entitled to an equal share of the appreciation. Likewise, if you created that closely-held business during the marriage, even though your spouse may have no ownership interest, the entire business is marital property subject to the presumption of equal contribution. In other words, the non-owner spouse is presumed to be entitled to 50% of the total value of the business. Until recently, transferring a pre-marital asset to your joint names usually resulted in loss of that separate pre-marital portion.
THE EFFECT OF COMMINGLING
The Oregon Supreme Court recently decided a case that muddies the waters of marital property distribution even further. In Kunze and Kunze, 337 Or 122 (2004), the court held that commingling separate assets with marital assets may not always result in a 50/50 division of the asset. In Kunze, wife purchased rental property during the marriage with her separate assets and then transferred title to both her and her husband. Wife used the rents to pay off joint marital expenses. The court did not determine this to be marital property. Rather, the court found that the purpose of adding husband to the title was to refinance the property and doing so did not convert it into marital property. The Kunze decision creates a burden on those parties who seek to prove the intent of the other spouse when martial assets are commingled with pre-marital or separate assets. There are no bright lines in this area of the law and each case is decided on its own facts.
