Minnesota Divorce and Division of Marital and Non-Marital Property

MP900305711[1]Minnesota is an equitable property state as opposed to a state like California, which is a community property state.  Minnesota Courts use the standard of “just and equitable” to divide property in a Minnesota divorce.  Minnesota divorces usually result in both parties receiving an equal share or equal value of the marital property. Minnesota Courts, however, reserve the discretion to divide property unequally.

Generally, property in a Minnesota divorce is characterized in two ways:   Marital and Non-Marital.

Marital Property

We begin with the proposition that all Minnesota divorce property, including money earned or items acquired during the marriage are marital property.  The term “all property” means everything, including, savings, recreational equipment, real property, pensions, household items, and so on.  The foregoing list is not exclusive.  Whatever parties acquire  during the marriage is presumed to be marital property and subject to a just and equitable division.

Non-Marital Property

Property that one party receives from an inheritance or as a  gift or acquired pre-marital  (acquired prior to the marriage)   is non-marital and not subject to division.  The difficulty comes, however, in  proving the non-marital property claim.    The law places what is called the burden of proof on the party alleging that his or her item is non-marital property. Proving up a claim for non-marital property involves tracing the inheritance or gift or pre-marital item through documentary evidence and testimony.  Think of the non-marital tracing as a river of paperwork that traces each step of the property’s life to its end result as separate non-marital property that was  inherited, gifted, or acquired prior to the marriage.

Often times the nature of the non-marital property is changed, but it may still be claimed as non-marital if the tracing is complete.

Suppose, for example, that one party inherits a coin collection of Morgan Silver Dollars.   That party sells the Morgans and buys a Harley Davidson.  The Harley is still non-marital property if the funds can be traced from the inheritance to the sale of the Morgans to the purchase of the Harley.

What happens if that party sells the Morgans and buys the Harley, but is short on cash and adds marital funds to the final purchase ?   The Harley is now partly non-marital and partly marital.   The river of paperwork now must substantiate both the non-marital tracing and the tracing of any marital funds used for the purchase.   The aim is to determine what percentage of the total purchase price is non-marital vs. marital funds.  This percentage can be applied to the overall fair market value of the property to sequester the marital funds from the non-marital funds.  For example, the Harley was purchased with 80% non-marital funds from the sale of the Morgans and 20% of the purchase price came from marital funds. Our Harley rider owns 80% of the bike as his or her non-marital property and the marital community owns 20% of the bike. If the bike is valued at $10,000.00, then our Harley rider has an $8000.00 non-marital interest in the Harley and the marital community has a $2000.00 interest in the Harley.

Buying and selling real estate and other items becomes increasing complex and difficult to sort out as non-marital and marital funds are mixed or blended.

Active vs. Passive Appreciation

An asset’s value increases because of active efforts of the marital community to improve that asset. The increased value or appreciation of the asset may be marital property.   This situation is most often seen where the parties improve the homestead or other real property or take on a very active role in management of funds; for example, trading stocks.   Passive appreciation is self-explanatory.  The value of an item increases without an effort on the part of the marital community usually through market forces.

Advice

Keep excellent records of all inheritances, gifts, or property that you acquire prior to marriage.  Keep even better records if you mix or blend non-marital property and marital property.

Note that in Minnesota a gift between married parties is marital property.  An engagement ring, however,  is a pre-marital  gift and separate property!

Kate Willmore, Saint Cloud, Minnesota, Family Lawyer and Mediator

(320) 217-6030   kaw@katewillmorelaw.com

http://www.katewillmorelaw.com          http://www.mediationminnesota.com

Copyright 2014

About Kate Willmore, Esq.

Kate Willmore, Saint Cloud, Minnesota, divorce, custody and family attorney brings over 25 years experience to every client's legal matter. *** Licensed in Minnesota and in California

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