In a recent decision by the Supreme Court of Missouri, the Court held that a spouses contribution to otherwise separate property creates a marital interest that can be divided by the Court. In Missouri, property that was owned prior to the marriage is generally considered to be separate, non-marital property. Separate property is awarded to the spouse who owns the property, and marital property is divided by the court in some ratio, very commonly 50/50. There are exceptions to this rule of course, including, but not limited to, source of funds, transmutation, and marital contributions.
In the recent decision, one spouse owned a business with a value of $20,000 at the time of the marriage, and during the course of the marriage the value of the business increased to around $500,000. The other spouse never had legal title or a legal interest in the business, but made contributions to the business, including reducing a substantial amount of debt, acting as a guarantor and corporate officer, conducting all bookkeeping and corporate banking, managing the office, introducing new products, making capital improvements, and working as an employee.
The trial court found that these contributions created a marital interest in the property, and the Supreme Court agreed and affirmed the equal division of the equity in the business under the rationale that marital labor, effort, or services result in a marital interest in the increased value of a spouse’s separate property if there is proof of: (1) a contribution of substantial services; (2) a direct correlation between those services and the increase in value; (3) the amount of the increase in value; (4) performance of the services during the marriage; and (5) the value of the services, the lack of compensation, or inadequate compensation.
The court found that all these requirements were met and upheld the decision of the trial court. The full opinion can be read here.