Premarital Property Division

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On June 17, 2004 the Oregon Supreme Court handed down its decision in the Matter of the Marriage of Kunze. This case represents a significant departure from prior case law on the issues of property division. Under the Kunze decision, the court is directed to look more closely at the source of assets and the contributions of the parties. When one party brings property to the marriage, the court may now back out as separate property the premarital value of the contribution, even if it has been integrated into the joint family finances. Additionally, contributions made from separate assets to the acquisition of assets jointly acquired during the marriage may, under the proper circumstances, also be separated out of the property division.

Prior to the Kunze decision, it was commonly held by the courts that if you integrated a separate asset into the joint financial structure of the marriage, you would lose the right “back out” the premarital value. Now the court may look to the contribution from separate assets, even on jointly held items, and may give the party who made the contribution from separate funds a “credit” in the property division. For example, if wife sells her premarital residence and puts down $50,000 on a joint home with her new husband, the court, under the proper circumstances, could give wife a credit for her $50,000 contribution in the property division.

The application of these rules is very fact specific and would vary with each case. The court is charged overall with designing a property division that is “just and equitable” under the circumstances. Even under Kunze, the court retains the right to include separately held property in the property division if it would be “just and equitable.” No lower court has yet relied on the Kunze decision, and how trial and appellate courts will respond to this ruling is yet to be seen. This new look at how the law in Oregon is applied will only effect pending cases and will not effect property divisions that have already occurred.