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What is the 'source of funds' rule in Georgia family law?

This blog has previously discussed some of the basics of property division in a Georgia divorce. For instance, we have touched on the concept of "equitable distribution," which holds that any property considered "marital property" should be divided fairly between the parties. We have also noted that "fairly" does not necessarily mean "equally" in such cases. One major stumbling block that parties to a divorce may encounter when it comes to property division, however, is a large asset, such as a family home, especially if it is not entirely either separate or marital property.

One question that may arise during a divorce is how to split the home that the couple had shared. Sometimes a party will be awarded the home, while the other party is compensated for his or her interest in it with some other marital property. Sometimes the home will be sold, and the proceeds split between the parties. When the home was purchased during the marriage and is completely marital property, the only question is how to divide it equitably. However, what if the home belonged to one spouse prior to the marriage, but some marital funds were used along the way, either to pay a mortgage, or to create improvements to the property?

Georgia follows a rule known as the 'source of funds' rule. What this means is that each party will be considered to have an interest in the home equal to his or her proportion of investment in it. This is different from some other legal rules followed elsewhere, such as that the status of property as marital or separate is fixed at the time title is acquired, or that any use of marital funds converts the property to a marital asset in its entirety. Under the source of funds rule, someone who brings non-marital property to the marriage is entitled to a separate interest equal to the ratio of the non-marital investment to the total investment (marital plus non-marital) in the property. Thus, if the non-marital investment was 50 percent of the total investment, half of the home's value would be separate property and the other half subject to equitable distribution.

Of course, attempting to figure the proportion of non-marital investment to total investment may get complicated. Further, what an equitable distribution of the remainder is may also be difficult to easily discern. Individuals with questions as to asset distribution or other family law matters may wish to consider speaking with a Georgia family law attorney.

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