Minneapolis Divorce Attorney & Lawyer : Minnesota Family Law Firm : Brown Law Offices : St. Paul, Twin Cities MN

Minnesota law categorizes property as marital or non-marital.

Marital property is usually divided equally while non-marital property is allocated entirely to the party who maintains the non-marital interest. Non-marital property involves the interest a party has in property accumulated prior to a marriage or property received as a gift or inheritence by one spouse, individually, during a marriage. Marital property involves any property that the parties accumulate during their marriage, including home equity, retirement assets, business interests, bank accounts, investments, motor vehicles and other property of value.

In order to ascertain the value of property, experts are typically retained. These include real estate appraisers, actuaries, business valuators and other individuals with specialized knowledge in determining the market value of various assets.  These experts can be retained by one or both of the parties.

Once all property interests are valued, a balance sheet is put together to reflect the allocation each party will receive.  Naturally, one party will receive more property than the other as items are divided.  When this occurs, a cash payment (equalization) is typically made from the spouse receiving more property to the spouse receiving less property in order to equalize the cumulative value of the assets they receive as a result of the dissolution of marriage.

Debts are typically treated the same way as assets.  Quite often, the court will allocate all debts incurred during the marriage equally.  Debts that remain from a time preceding the marriage are typically allocated to the party incurring the debt.  The same is true for debts incurred post-separation. The value of a particular debt is usually verified through a recent statement. Typically, if the party is allocated an asset they will take any debt that accompanies it.  A prime example involves an automobile.  If one spouse takes a car, they will likely have to accept responsibility for the debt associated with it.

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In a published decision entitled Alam v. Chowdhury, the Minnesota Court of Appeals has found that marital property involves acquisitions or increases in value during the marriage itself (not beyond) - even if one party commits fraud upon the court. Judge Hudson wrote for the majority.

The parties were married in 1979. Husband filed a Petition for divorce in 2001, serving Wife and showing her a proposed Marital Termination Agreement. She failed to provide an Answer and Husband moved for default judgment. The district court granted default judgment and signed a Judgment and Decree that was consistent with Husband's proposed Marital Termination Agreement.

In January of 2006, Wife moved to re-open, based upon allegations that Husband misrepresented the value of assets, claimed pre-marital assets that he could not trace and referenced an inheritance that Wife "was to" receive in the relevant Agreement. The district court found that husband committed a fraud upon the court and valued his retirement plan as of January of 2006 - five years after the dissolution of the marriage. Husband appealed.

While the court of appeals found that the court did properly re-open, it also found that the district court improperly applied Minnesota's valuation statute, which reads:

[t]he court shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable. If there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.

Judge Hudson wrote:

Here, it is undisputed that the parties’ marriage was dissolved in 2001. Thus, during their post-dissolution cohabitation, they were not living in a marital or purportedly marital relationship; accordingly, property acquired during that cohabitation was not marital. Because the district court’s application of the presumption of marital property ignores the part of the statute requiring a marital or purportedly marital relationship, the district court’s application of the presumption runs afoul of the requirement that “[e]very law shall be construed, if possible, to give effect to all its provisions.”

The court of appeals reversed, and ordered the district court to value and divide the account appropriately.

In his dissent, Judge Worke opined that "[b]ecause disregard of legal process and lack of due diligence in objecting to the dissolution weigh heavily against reopening the judgment and decree after so much time has passed, I part from the majority, and determine that the district court abused its discretion by vacating the judgment and decree."

Troubling to many clients is the fact that the court will often value assets as of the date of the first pre-trial conference. This hearing is the final hearing to take place before trial and often occurs more than a year following the service of the Summons and Petition. It seems to me that the standard would be just if the date of service of the initial pleadings served as the valuation date. That way, litigants wouldn't be deterred from purchasing property, placing money into retirement accounts or saving money for the difficult future they face.

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Minnesota divorce statutes distinguish between marital and non-marital property. Marital property involves property acquired during the marriage, while non-marital property involves an asset that was brought into the marriage or received as an inheritance or gift to one spouse but not the other during the marriage. I'm often asked how Minnesota law treats a personal injury settlement. The answer rests in the nature of the recovery.

In Minnesota, an injury survivor can recover damages for a host of "losses," including past and future wage loss, past and future medical expenses and pain and suffering.

Because wages are considered marital property, the past wage loss portion of an injury settlement is deemed marital in nature. The same is true of proceeds received to pay for past medical expenses: a marital liability. As a result, this portion of the personal injury or worker's compensation award is subject to division among the parties.

However, an award for future wage loss and payment received for future medical care is non-marital. Earnings realized following a dissolution of a marriage remains the exclusive property of the earning spouse. Similarly, a debt incurred by a spouse following divorce must be paid by the person who incurs the obligation. Therefore, these portions of an injury settlement are non-marital in nature and are not subject to division.

Similarly, payments made for pain, suffering and loss of enjoyment of life are not subject to division. In a literal sense, your body is non-marital in nature. You brought, for example, your hand into your marriage. Your hand is not subject to division if the marriage dissolves. If you lose your hand in an accident, you have lost a non-marital asset. Compensation for the lost non-marital asset is non-marital as well.

Difficulty rests in the fact that most personal injury cases are settled before trial. The parties will sign a release form. However, that release form does not typically break down the award into neat categories, leaving room for argument on both sides. A jury verdict form, however, will break down the portion of the award given for wage loss, medical bills and pain and suffering.

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One of the more common questions I face from a potential client involves title to property - whether a car, boat, house, ATV, business, bank account or otherwise. They ask, "My spouse says that because my [insert the property interest] is not titled in my name, I am not entitled to any of it. Is that true?"

One highly unique aspect of family practice is the fact that the litigants, unlike basically all other lawsuits, often continue to speak with one another (and even live together) during litigation. Sometimes that can be productive - if the parties are discussing issues in good faith. Other times, one spouse is simply trying to play games and get inside the head of the other. My suggestion? Don't get your legal advice from your soon-to-be ex.

Here's the answer: Title to property is essentially meaningless in divorce court. Minnesota law defines marital property as anything accumulated by the parties during their marriage. Marital property is subject to equal division. The timing of the purchase, not the title, dictates the ownership interest for purposes of a divorce.

Of course, the law recognizes non-marital property, which is not subject to division. Non-marital property has a very specific definition. For the sake of this post, understand that nowhere in the definition of non-marital property is the concept of "marital title" addressed. Unless a piece of property was brought into the marriage by one spouse or received as a gift to one spouse but not the other during the marriage, the property at issue will likely be divided equally among the parties.

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You owned a house before the marriage. You paid $15,000 cash, and took out a mortgage for $110,000. You made mortgage payments of $800 a month for 2 years before the marriage. Before getting married, you made substantial improvements to the house, increasing the value. After 5 years of marriage, you are getting divorced and you want to keep the house. The real estate market has been good for sellers, and the value of your house has risen to $180,000. Your spouse agrees you can keep the house but wants $90,000 (half the value.) What is your response and how do you support your position under Minnesota law?

This is an example of an asset that is part "marital" and part "non-marital". "Marital" assets are divided in a fair and equitable way (usually 50/50). Generally, non-marital assets are not divided - they are awarded to the spouse who owns the non-marital asset.

With this house, you need to figure out what part of the $180,000 is marital and what part is non-marital. The $15,000 downpayment, the mortage payments for 2 years before the marriage, the improvements you made before the marriage, and part of the increase in value of the house are "non-marital."

On the other hand, the mortgage principle spend down and increase in market value applied to that spend down is "marital." The process of running these calculations is know under Minnesota law as the Schmitz formula - named after a MInnesota Supreme Court decision that established the applicable standard. These determinations can become quite complicated, especially when, as in recent times, multiple refinances of a particular piece of property have occurred since marriage.
 

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