There are a number of issues involved in dividing the assets and debts of the parties to a divorce, including valuation methods and determining what is "marital" and what is "non-marital." Minnesota law generally provides for an equitable (almost always equal) division of marital property.

We often think about divorce in terms of dividing a couple’s assets: cars, homes, real estate, bank accounts, and investments top the list. Property division in divorce can be challenging. Sometimes, our most treasured assets don’t carry a price tag. Family keepsakes are a source of contention in divorce. They often lack monetary value, and they can be hard to divide between the parties for sentimental reasons. Learn the best course of action for dividing mementos in a divorce.

Catalogue Everything

It’s your responsibility to catalogue all of your assets in a divorce. The same responsibility applies to keepsakes. Memorabilia and gifts with special meaning should make your list. Don’t worry if the items have little monetary value. Your property will be divided in accordance with your state’s divorce laws. Minnesota is an equitable distribution state. A judge will divide assets in a way that’s fair and equitable for both parties.

For example, a couple’s dishware may be a wedding gift that passed down through generations of the wife’s family. The dishware may belong to the couple, but the wife will more likely get to keep it as part of the property division.

Who Gets the Pet?

The family pet is often a hotly contested asset. You may adoringly refer to your dog as your “baby.” The law doesn’t treat pets any differently from the family china. A poll from the American Academy of Matrimonial Lawyers found that pets are increasingly a custody issue in divorces. A judge will consider who will spend the most time caring for the pet, such as feeding, walking, and visits to the veterinarian.

Consider Your Motivations

Consider why you want a particular piece of memorabilia or family keepsake. Is it actually because it’s a memento that you can’t live without? Is it a power struggle between you and your soon-to-be ex-spouse? Does it remind you of a happier time before the divorce proceeding began? We’re all guilty of feeling spite and resentment from time to time. Ask yourself if you really want the item or if you just want more control over the situation.

Some judges will divide family keepsakes or mementos. Other judges will require that you do handle this division process through mediation. Talk to your attorney about what’s most appropriate for you.

A divorce affects every aspect of your life: social, emotional, and physical. Divorce can even disturb your business. Your small business is one of your most important assets. Know how to protect it.

Here’s a common scenario: you marry your spouse when your business is worth $100,000. You file for divorce 20 years later. Your business is worth $10 million now. The business is your own, but your ex-spouse has some stake in it. It may be too late for the prenuptial, but you can still take steps to protect your business from divorce.

Keep All Finances Separate

Keeping your family and business bookkeeping separate is more than just good business sense. It could also help save your enterprise.

Pay Yourself Well

Give yourself a good salary to keep your family afloat. Funneling all of the money into retirement may seem like a good idea, but remember that your soon-to-be ex-spouse might have a claim to it in a divorce. Funnel all of your extra cash back into the business, and your spouse may have a better legal argument for keeping a stake in it.

Ease Your Spouse Out of the Business

It may seem cruel to fire your spouse. It makes good business sense if you’re headed for a breakup. Soon-to-be ex-spouses have more of a stake in a company when they’re involved for longer periods of time.

Divide business assets cautiously. Sacrifice homes, vehicles, and other things to maintain 100% ownership of your business.

Put Your Business in a Trust

A business in a trust is no longer considered an asset. If you don’t personally own it, it won’t be subject to property division. Talk to a business lawyer to see whether this is an appropriate move for you.

Take Preventive Measures

We can’t always predict the future. If you’re getting married, consider taking preventive measures to protect your business, such as signing a prenuptial. You could sign an early postnuptial in the alternative. Judges can view postnuptials skeptically, depending on circumstances. Consider a buy-sell agreement if you’re uncomfortable with prenuptials or postnuptials. A buy-sell agreement details what will happen to a company in the event of a divorce.

More and more, people are taking pet disputes to divorce court. When a pet has been shared between partners through the duration of a marriage, courts will look at the following details to determine who should get “custody,” even though pets are considered “property” under Minnesota law.

1. Who takes care of the pet? – Who feeds the pet and takes her to vet visits? You might ask your veterinarian to sign a statement indicating you are the one who brings the pet to appointments. A family friend or relative can also serve as a witness regarding who is the primary caregiver.

2. Where will the kids live? – If the animal is a family pet, the court will want to know with whom the children will live after the marriage is dissolved. If you’ll share custody with the children, you may end up sharing custody of the pet, too. Pets can be finicky, however, so if it comes down to where the kids live and who has the best relationship with the pet, the pet and the kids could actually end up in different households.

3. Lifestyle – Whose lifestyle is better suited for taking care of the pet? If one of you travels for business a lot, or spends long hours away from home, then the other partner could end up with custody.

4. Living environment – Is where you will live after the divorce suitable for a pet? If one of you moves into an apartment where pets are not allowed, then the animal will be placed in the home of your spouse. Other living environment concerns could affect where the pet ends up as well. Are other pets involved? Do those pets get along with yours? The court will consider as many factors as are relevant.

5. Prenuptial agreement – Who owned the pet before you were married? If you haven’t tied the knot yet, get your future spouse to sign a prenup.

During a high net worth divorce, or when a couple has complex finances that need to be divided, a forensic accountant assesses the value of marital assets and debts to prepare to divide property. The accountant’s work and testimony can be used in court to ensure an equitable outcome.

Types of Assets Assessed

A forensic accountant can help divide the following kinds of assets:

•    Unique antique or art collections
•    Retirement funds
•    Stock options
•    Complicated partnerships
•    Deferred compensation
•    Property in other states or nations
•    Closely held businesses

A forensic accountant can also dig into questionable financial matters to resolve ambiguities and prevent illegal or unethical practices. For example, he or she can locate hidden assets or sources of revenue, spot business fraud or lay the groundwork for establishing fairer terms for alimony and child support payments.

Benefits of Using a Forensic Accountant

1.    Look for hidden monies. Your spouse might have money or property hidden off shore or might have gifted jewelry or cash to a friend with the understanding that the person will return those assets after the divorce finalizes. Alternatively, your spouse might be secretly supporting a lover or paying for another home. The accountant can examine records for anything that raises a red flag.

2.    Review inconsistencies between various financial documents. For instance, a loan application that states a certain income should be consistent with tax returns.

3.    Confirm that business expenses are accurate and are not actually personal expenses.

4.    Assess the value of a family business.

5.    Review cash flow to determine child support payments.

6.    Discuss tracking separate and community property in order to divide assets properly.

7.    Help your lawyer collect the correct documents to ensure that you have accurate information when preparing a subpoena.

8.    Help your lawyer think of questions to ask your ex.

9.    Testify as needed at depositions or in court.

10.    Assist other experts, including private investigators.

11.    Help you understand the tax consequences of suggested settlement options.

You made a painful decision to end your marriage after months of therapy and emotional conversations. You’re coming to terms, emotionally, with the idea of separating, and now you need to split up your assets and debts. How can you ensure this process goes fairly? What if you’re worried that your spouse’s grip on the family finances will prevent you from getting a clear and complete picture?

Minnesota laws state that except for personal gifts, in general, all assets acquired during the marriage belong to both parties, no matter who earned them. If you suspect your spouse could be hiding assets, here are some insights to protect your rights and ensure fairness.

Discovery Helps Force Disclosure

During the discovery phase, the judge will order you and your soon-to-be ex to comply with requests for information about assets and debts. If he lies in this reporting, the court can charge him with perjury. If he refuses to provide documentation, the court can financially penalize him or rule against him on other issues.

That said, a person committed to hiding assets might beat this process. For instance, let’s say your husband opened a secret Cayman Islands bank account that forensic accounting analysis fails to detect. The court would have no way to identify and punish his actions.

Locating Hidden Assets

If your spouse used false documents or the help of a third party to hide assets, what should you do? An attorney can try the following:

•    Requests for admission (a.k.a. interrogatories). These formal legal requests require your spouse to respond truthfully to questions about the locations of assets and accounts.

•    Testimony. During oral deposition, your attorney can ask your spouse questions about his finances in an attempt to expose wrongdoing or clarify concerns about his employment or relationships with third parties, such as a sketchy investor or business partner.

•    Documents. Your lawyer can request financial statements, account records, tax returns and loan applications.

•    Inspection demands. You can request an inspection to examine the contents of private property, such as a safe deposit box.

Hiding Places for Assets

A spouse might hide diverse property, including cash, insurance policies, stocks, bonds, travelers’ checks, savings or municipal bonds, variable annuities and mutual funds. Here are some common tactics:

•    Storing money and property in a safety deposit box held under an alias
•    Repaying fake debts
•    Transferring funds to another person or business
•    Putting money into a hidden 401(k), pension or similar plan
•    Creating fake custodial accounts for a child
•    Delaying bonuses
•    Giving a “gift” to another person, such as a family member or business partner, under the unwritten assumption that that person will re-gift the money, after the divorce has been settled
•    Skimming cash from a business
•    Paying money to an non-existent employee to reduce the seeming value of a business enterprise
•    Intentionally getting a business valued at a lower rate
•    Delaying business contracts until after a divorce is final
•    Purchasing property with hidden cash

Forensic Investigation of Assets and Debts During a Divorce

An investigator will need as much personal information as possible about the person suspected of hiding assets. He or she will need names, nicknames, addresses, social security numbers, and information about family members, financial advisors and business partners.

An investigator can look for hidden assets by assessing:

•    Income tax returns
•    Checking and savings accounts
•    Insurance statements
•    Cash flow in a business
•    Credit card reports and/or receipts
•    Public records
•    Loan applications, including personal net worth statements
•    Off-shore account

Divorce challenges those caught in the middle in surprising and unpredictable ways. Whether your husband blindsided you by revealing that he had been having an affair with someone at work, or you and your spouse separated after less than a year, after realizing that the relationship had no enduring foundation, you likely have a lot of concerns and questions.

For instance, how can you separate your finances in a way that leads to a fair outcome and a minimum of fighting and litigation?

Here are some tips and strategies for dividing property effectively:

Best Practices to Help Your Case

•    Understand how Minnesota categorizes assets. If you brought separate property into the marriage or earned or received it when the marriage ended, that property belongs to you. Examples include gifts, inheritances, wages and retirement benefits. However, if you acquire property during the marriage, the state might view it as a marital asset even if it’s held in your own name.

•    Determine the location and worth of all your property. Especially if the other spouse generally handled the household finances or separated from you under unusual circumstances, dig deep to identify exactly what the two of you have. Figuring out what these assets are worth can also be challenging. It’s easy to see the cash position on an account. However, you may need the help of a forensic accountant to evaluate jewelry, collectibles, antique furniture, and so forth.

•    Consider possible alternatives to traditional methods of resolving your differences, such as Alternative Dispute Resolution (ADR). If you and your ex can negotiate property distribution through ADR, you can save substantial costs on litigation.

Worst Practices that Can Hurt Your Case

•    Rush the process. If you rush through the divorce, you might end the marriage sooner and move on with your life. However, you could sacrifice property in the process, if you are not willing to be patient and resolve your differences. Plus, rushing the negotiations could accidentally trigger litigation, which costs more and takes more time.

•    Demand your own way. Divorce, at least in part, is an art of compromise. Identify what property you want to preserve and what you might be willing to give away during negotiations; doing so will empower you and help you win compromises from the other side.

•    Minimize your contributions. If you are the stay-at-home parent who quit working, you might feel that you did not contribute anything financial to the marriage. However, the court views your contribution as significant, and it will assign a financial value to your efforts.

When you end a marriage, you understandably face a myriad of emotions, including sadness, anger, frustration, grief – and possibly even relief. The emotional turmoil that you face can mean that your decision-making skills sometimes suffer. However, you cannot afford to let your feelings rule you during this critical time, since your financial future could depend on the decisions you make.

Smart Practices for Protecting Your Property and Other Assets

Quantify the marital assets. Make sure you and the other spouse account for all property that might be relevant, so everyone is upfront and fair.

Have patience. A best-case scenario might mean that both parties agree on property division, even if it takes time to work out differences.

Look hard for solutions. Even if you begin the process with numerous disputes and wind up litigating, the courts will finalize your divorce sooner if you can negotiate elements of property division without help from a judge.

Consider using an Alternative Dispute Resolution (ADR) approach, like mediation, to find ‘win-wins’ regarding property distribution. Another option in Minnesota, Financial Early Neutral Evaluation (FENE), uses independent experts who help both parties negotiate financial matters.

Understand the law. Minnesota uses equitable distribution rules, which means that even if property is held in one spouse’s name, it may still be counted as marital property, because it was acquired during the marriage. Minnesota views non-marital property as assets that do not jointly belong to the couple, usually acquired apart from the marital union.

Understand the relevant factors. The courts consider various factors before deciding on an equitable distribution, including the following:

  • Which person has the greater need for assets;
  • Each person’s marketable job skills;
  • Each person’s earning potential; and
  • Who contributed to the acquisition of the property.

The courts place value on one partner’s care for children and/or the home. For example, if you acquire minimal assets during the marriage and have minimal assets to split, you might be left with next-to-nothing after the divorce. The courts can decide to rectify this by directing your soon-to-be ex to transfer non-marital assets to you.

Understand how property is classified in Minnesota. Non-marital, or exempt property, belongs to you if you brought it into the marriage or acquired it after the marriage dissolution. Retirement benefits, gifts, inheritances and other earnings or assets can fall under this designation. While some states use the final date of the divorce decree to determine what is classified as marital property, Minnesota uses a relatively early date in the process, which varies by county.

Having a prenuptial or post-nuptial agreement can help. The courts have wide latitude in property division in equitable distribution jurisdictions, which means that you may need to be on the defensive if you brought significant assets to the union.

In terms of dividing the assets and liabilities of the parties following divorce, the first step in the analysis involves determining which assets are “marital” and which assets are “non-marital.”

Simply stated, marital assets are those acquired during the marriage, through marital efforts. Non-marital assets are those that one spouse: (1) brings into the marriage; (2) inherits during the marriage; (3) receives as a gift during the marriage; or (4) acquires through the sale of other non-marital property.

The general rule is that non-marital assets are awarded, in their entirety, to the spouse who demonstrates that their property interest is, indeed, non-marital. There are, however, exceptions.

In some situations, the Court may determine that it is appropriate to divide a non-marital asset. Pursuant to Minn. Stat. Sec. 518.58, Subd. 2:

If the court finds that either spouse’s resources or property, including the spouse’s portion of the marital property … are so inadequate as to work an unfair hardship, considering all relevant circumstances, the court may, in addition to the marital property, apportion up to one-half of the property otherwise [non-marital] to prevent the unfair hardship. If the court apportions property other than marital property, it shall make findings in support of the apportionment. The findings shall be based on all relevant factors including the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, and opportunity for future acquisition of capital assets and income of each party.

The practical reality is that the Court will rarely invade non-marital property. There are two common situation in which the Court will do so: (1) if one spouse will be left insolvent; or (2) if non-marital interests represent the entire estate of the parties.

If the estate of the parties contains some marital and some non-marital interests, the Court may unequally allocate marital property in lieu of a division of non-marital interests.

At the end of the day, the vast majority of divorces in Minnesota result in an equal division of the marital estate (those assets and liabilities incurred, or accrued, during the marriage.

“Equal division,” however, is not the relevant standard. Pursuant to Minn. Stat. Sec. 518.58, the Court must make a “just and equitable division of the marital property of the parties.” What constitutes a “just and equitable” allocation? Well, usually equal – but not always.

In Minnesota, the family law judge has the ability to consider a number of statutory factors in dividing property unequally, including:

  • The length of the parties’ marriage;
  • Whether either party has been married before;
  • The age, health, occupation and sources of income of each party;
  • The vocational skills of each party;
  • The employability of each party;
  • The income of each party; and
  • The nature of the marital estate (both assets and debts).

Does this happen very often? No – except for cases involving a dissipation of assets.

“Dissipation” is described by statute as “without the consent of the other party…in contemplation of divorce, separation or annulment…” transferring, encumbering (creating debt against), concealing or disposing of marital assets, except in the usual course of business or for necessities of life.

Here are a few examples of dissipation:

  • Selling a motorcycle to a family member for $1.00, knowing it will be bought back for $1.00 following divorce;
  • Placing large amounts of debt relative to an extra-marital affair (hotel rooms, restaurants, airline tickets) on a credit card;
  • Incurring significant gambling losses;
  • Destruction of items of personal property (electronics, furniture or clothing);
  • Investment losses relating to an obvious scam; or
  • Spending large quantities of money on drugs or alcohol.

Should dissipation occur, the Court will likely allocate assets in such a way that the non-offending spouse is put back in the position they would have been, but for the dissipation – usually by allocating other assets to them. The party claiming dissipation bears the burden of proving that it occurred.

In the vast majority of the divorce cases we handle, the parties own real property. Sometimes that property is a primary residence, while other times the property takes the form of a lake cabin, vacation home, investment property or business property.

Generally speaking, the equity resting in each piece of real estate is subject to equal division among the parties. It is, therefore, appropriate to determine how the parties will realize their equity. Will they sell the property and split the proceeds? Do they agree on the value of the property? Or, is an appraisal of the real estate necessary because one party wishes to keep the property and “buy the other side out.”

When an appraisal becomes necessary, there are a number of approaches utilized by the professional hired to value the property. They are characterized as the:

  • Cost Approach;
  • Market Approach;
  • Income Approach;
  • Investment Value Approach; and
  • Development Cost Approach

The cost approach involves a determination of what it would cost to rebuild the same property from scratch. This includes not only the structure itself, but also the improvements to land that would be necessary to complete the sale and take ownership. This approach is typically reserved for relatively new construction.

The market approach involves a comparison of similar properties that have recently been sold. Comparable sales offer a measuring stick based on recent economic activity. So as sufficient data is available, the market approach is most often relied upon in determining the value of a traditional home.

The income approach involves market value being determined as a multiple of profits derived from the use of the property. What would a willing investor pay to receive a return of “x?” Naturally, the more earned from the property, the higher the value of the property itself. This approach is often used to value investments, such as apartment buildings, commercial office buildings and shopping centers.

The investment value approach (rather uncommon) applies to property with sophisticated metrics for measuring the benefits, both short and long-term, associated with a piece of real estate. The more highly unique a piece of property, the more likely the investment value approach will be utilized.

Finally, the development cost approach may be utilized in a situation in which the parties own raw, undeveloped land. Questions involving future use and development potential, and then profits that may arise therefrom, are taken into account.