Divorce; Property division; Equitable distribution; Marital vs separate property; Cunningham v Cunningham; Commingling; Appreciation; McNamara v Horner; MCL 552.401; Contribution; Reeves v Reeves

The court held that the trial court erred by treating certain retirement accounts and their appreciation as defendant-husband’s separate property without properly determining the marital component and the effect of commingling. Thus, it vacated the entire property award and remanded for revaluation and apportionment. The parties married in 2010, largely kept finances separate, and litigated division of assets in a bench trial. The trial court awarded defendant four retirement accounts, including two Fidelity IRAs created by rollover of earlier accounts, as separate property along with appreciation. Plaintiff-wife appealed as to the Fidelity IRAs and an E*Trade IRA. The trial court’s ruling effectively treated the entirety of the Fidelity IRAs as premarital despite evidence the underlying retirement plan and savings plan included contributions made during marriage. On appeal, the court reiterated that the first step in equitable distribution is categorizing property as marital or separate, that marital property generally includes property acquired or earned during marriage, and that retirement assets may be part of the marital estate. It emphasized that “‘separate assets may lose their character as separate property and transform into marital property if they are commingled with marital assets and treated by the parties as marital property.’” The court held that it was erroneous to classify the Fidelity IRAs entirely as separate where defendant testified the funds were “a mix of marriage and pre-marriage[]” funds and contributions continued until 2016, making the marital portion subject to division under MCL 552.18(1). The court explained that appreciation may also be divisible and distinguished passive from active appreciation. Defendant’s testimony showed active management as to the Fidelity IRAs but it was “unclear whether plaintiff facilitated or assisted defendant’s management efforts such that she is entitled to compensation.” Also, it was unclear whether defendant’s separate property was “commingled with marital funds when they were rolled over into the Fidelity IRAs.” The court directed the trial court on remand to make findings on these issues as to the Fidelity IRAs. It must also similarly address the E*Trade IRA because defendant’s “passive” management testimony was undefined and the record did not establish whether appreciation was purely market-driven or involved active decision-making and facilitation. Because these accounts had significant value affecting the overall distribution, the court vacated the entire property award for reconsideration after proper marital-property determinations.