Though statistics vary, it is generally thought that around 30-40% of marriages in the U.S. end in divorce. Obviously people don't get married with the goal of legally separating in the future, it is a possibility that should be considered. For those who are already married or couples contemplating marriage, understanding how property is divided and distributed in a divorce in Hawaii is an integral part of estate planning.
In this post, we will review how property is categorized and divided by the court during a divorce. In Hussey v. Hussey (1994), the Hawaii Intermediate Court of Appeals provided three classifications of property, which are as follows:
Premarital Separate Property: This is property owned by each spouse prior to their marriage/cohabitation. When two people marry, this property becomes either "Marital Separate Property" or "Marital Partnership Property".
Marital Separate Property: This property is owned by one or both of the spouses at the time of divorce and can be described as follows.
A. All property that was excluded from the marital partnership by an agreement in conformity with the Hawaii Uniform Premarital Agreement Act.
B. All property that was excluded from the marital partnership by a valid contract, such as a post-nuptial agreement.
C. All property that...
1. Was acquired by the spouse-owner during the marriage by gift or inheritance,
2. Was expressly classified by the donee/heir-spouse-owner as his or her separate property; AND
3. After acquisition, was maintained by itself and/or sources other than one or both of the spouses and funded by sources other than marital partnership income or property.
Marital Partnership Property: All property that is not Marital Separate Property.
These classifications are important to understand because they are the starting point in determining what property is available to be divided between the spouses. Marital Partnership Property is the property is available to be divided and distributed between the spouses at the discretion of the court.
On the other hand, Marital Separate Property cannot be distributed to the non-owner spouse or used to "offset" any award of Marital Partnership Property to the other spouse. It has, in effect, been excluded from the marital partnership. However, the court may take into consideration the amount of Marital Separate Property each spouse has and "alter" the final distribution of the Marital Partnership Property based on the "respective separate conditions of the spouses." This is within the court's discretion and equitable powers.
For soon-to-be wed or married couples, understanding how property is classified in divorce proceedings highlights the importance of having a premarital agreement or post-nuptial agreement so that Marital Separate Property is clearly defined.
For gifts and inheritances to be classified as Marital Separate Property all the above-mentioned conditions must be met. If a spouse does not expressly state the gift or inheritance is separate property or uses marital assets or efforts to maintain the gift or inheritance, that gift or inheritance will be likely be classified as Marital Partnership Property and divided accordingly.
Samuel K.L. Suen is an attorney based in Honolulu, Hawaii specializing in estate planning, probate, conservatorship and guardianship matters.
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