Transmutation means to change form. Transmutation of real or personal property refers to the property changing form from separate property to community property or vice versa. The characterization of property in a divorce or legal separation case is extremely important and determines how the property can be distributed.
The general rule is non-marital property is not subject to equitable distribution – i.e., the spouse that enters the marriage with the pre-marital property exits the marriage with the pre-marital property. However, there are certain situations in which Rhode Island Courts might decide non-marital property is subject to equitable distribution under R.I. Gen. Laws § 15-5-16.1(a). This is known as transmutation and usually occurs when the spouse is careless in keeping his or her property separate as to retain its pre-marital or non-marital classification.
Although inherited/gifted property is generally not subject to Rhode Island’s equitable distribution laws (meaning it belongs to the spouse who inherited or was gifted the property), commingling and transmutation can change this. For example, if you inherit a house from your great aunt years before marriage but then add your spouse’s name to the mortgage and deed, your spouse contributes toward common household expenses and home improvements, etc. the Court could find you transmuted your pre-marital property into marital property and that the house you entered the marriage with is subject to equitable distribution as a result.
Another example is inheriting $50,000 from a relative that you deposit into a joint banking account (which you and your spouse share and often use) and then purchasing a brand-new car with funds from that account, the Court could find your spouse is entitled to a portion of the equity or value of that vehicle since you comingled and transmuted the inherited funds. See Cloutier v. Cloutier, 567 A.2d 1131, 1132 (R.I. 1989) (stating that "property can be converted from nonmarital property into marital property if changed in form and put into joint names").
What is the doctrine of active appreciation?
Active appreciation refers to separate property increasing in value during the marriage, under which the increase in value becomes a marital asset. See Horton v. Horton, 891 A.2d 885, 889 (R.I.2006) (declaring that "appreciation in value of property held in the name of one of the spouses prior to the marriage should be assigned as a marital asset").
Whether you are a spouse seeking to maintain separate property or a spouse seeking to overcome the presumption of separate property, you should consult an experienced Rhode Island divorce attorney to discuss the facts and circumstances of your individual case. Give us a call today at Repetto Law, LLC!
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