In Thorup v. Thorup, 554 P.3d 329 (Utah Ct. App. 2024) the Utah Court of Appeals: (1) set forth a framework to help determine whether a separate asset had become commingled with the marital estate when the marital estate pays back a loan drawn from that asset; and (2) outlined how a spouse’s day-to-day maintenance of the other spouse’s separate property could grant the maintaining spouse a share of the separate property’s appreciation.
For approximately 23 years during the marriage the parties lived in a home built by Husband’s father’s company. After living in the home rent-free for nearly 7 years, Husband’s father “gifted” the house to Husband as an inheritance. Title to the home was placed in Husband’s name; Wife was never placed on title. Shortly after receiving the home as an inheritance, Husband used the home as collateral for a $150,000 loan. Proceeds from the loan were not spent on the home, but rather addressed other marital matters such as medical bills, credit cards, unspecified “investments” and payment on the couple’s “cabin lot.” Marital funds were used to fully repay the loan. Thorup, 554 P.3d at 331.
On appeal the Utah Court of Appeals considered whether repayment of the $150,000 loan with marital funds caused the home in any way to be commingled such that it lost its character as separate property. Id. at 335. In its analysis, the court noted that “our supreme court has made clear that a separate asset does not necessarily become marital property simply because a marital estate pays back a loan drawn from that asset.” Id. at 337. Then the court noted that “[t]he question of whether repayment of the loan by the marital estate resulted in commingling turns on whether the proceeds of the loan were used for marital estate purposes unrelated to the house or were, instead, used to increase the value of the house. If the proceeds were used . . . entirely for marital-estate purposes unrelated to the asset leveraged by the loan then . . . the transaction would be best characterized as a loan to the marital estate facilitated by [Husband’s] separate property. On the other hand, if the loan proceeds were used to improve the House, then repayment of that loan might . . . support a determination that commingling (or, alternatively, acquisition of an equitable interest) had occurred.” Id. at 338.
The Utah Court of Appeals also considered whether the appreciation of the home became commingled into the marital estate. Id. at 335. Here, the court recognized the “long-established legal principle that, ordinarily, appreciation on separate property belongs not to the marital estate, but, rather, to the spouse whose separate property it is.” Id. at 338. This general rule can be departed from on the basis of commingling, “but only when it is clear that the spouse intended to contribute the property to the marital estate or when it becomes functionally impossible to trace or account for the separateness of the spouse’s property.” Id. at 339.
Wife had argued that her involvement in the landscaping and maintenance of the home resulted in the home’s value being commingled. The court recognized that while “the investment of substantial marital assets into separate real property can support a determination that the separate property was commingled,” no evidence monetary contributions had been offered by Wife. Id. at 340. Further, the court noted that “[o]ne spouse’s residence at, and assistance with the day-to-day maintenance of, the other spouse’s separate real property will not usually be enough to render the entirety of that property’s appreciation commingled into the marital estate.” Id. Instead, when such contributions are made, the court should consider whether the spouse has made an equitable contribution to the value of the home that should be considered in the distribution of the marital estate. Id.
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