Non-Marital Property Becomes Marital Property when Commingled with Marital Property

Be Careful: Non-Marital Property Becomes Marital Property when Commingled with Marital Property

In Wallace v. Wallace, A13-2167 (Oct. 6, 2014), the Minnesota Court of Appeals held that non-marital property in bank accounts became marital property when the funds were commingled with marital property acquired during the marriage.

In this case, the wife asked that funds in a checking account and a savings account be awarded to her as non-marital property. Both accounts had belonged to her before the marriage. However, after she was married, she deposited her wages in the checking account and used the funds in that checking account to pay the couple’s monthly bills. She also made use of the funds in her savings account, by moving funds from the savings account to the checking account when needed to pay bills; she would then repay the savings account with her wages earned during the marriage.

The district court accepted the wife’s argument and awarded her $1,182.27 of the funds in the checking account and $20,076.91 of the funds in the savings account. The husband appealed.

The Minnesota Court of Appeals reversed the district court. The court noted that there is a rebuttable presumption that any property acquired by a married person during the marriage is marital property as well as a presumption that property acquired before the marriage is non-marital property. Minn. Stat. Section 518.003, subd. 3b. When a marriage is dissolved, the non-marital party goes to the party to whom it belongs while the marital party is divided equitably between the parties. Minn. Stat. Section 518.58, subd. 1.

Here, there was no dispute that the spouses commingled the marital property (the wife’s income during the marriage) with the non-marital property that she held before the marriage.   The wife argued that, looking at the balances of the accounts at the start of the marriage, the deposits, withdrawals, and balances at the end of the marriage, the non-marital property could be determined. The court rejected her argument, finding that the only way to maintain the non-marital character of the funds is either to maintain it in a separate account distinct from marital assets or to trace the funds by showing particular items of tangible property that were bought with non-marital funds.

 

How the Court Decided

The court relied on precedents that have held that commingling marital and non-marital funds converts all money in the account into marital property when the account is used for ordinary living expenses and the non-marital funds are not traced to a particular asset.

In order for non-marital assets to remain non-marital assets and belong solely to one spouse, the funds must either be segregated and not used for any marital expenses or must be used to purchase a tangible asset, enabling them to be traced to that asset. Thus, if non-marital assets are used to purchase (in full) a specific item, such as a valuable painting, that painting becomes a non-marital asset. But if the non-marital asset is used for living expenses, then it becomes a marital asset, in the absence of a premarital agreement.

Thus, the court held that all the funds in the accounts were marital property and, therefore, needed to be divided equitably.

In this case, the wife did not file a responsive brief to the Minnesota Court of Appeals. As this case illustrates, even if a party has won at the district court, if the case has been appealed, the party should file a brief in the appellate court. If you have any questions about preserving the non-marital character of your property, you should consult a family law attorney.

New Ruling from Minnesota Court of Appeals on Modification of Custody

New Ruling from Minnesota Court of Appeals on Modification of Custody

Minnesota Court of Appeals Holds that Granting the Non-Custodial Parent the Summer Break Is Not a Modification of Custody Nor a Restriction on Parenting Time When Done in Response to the Custodial Parent’s Move

In Suleski v. Rupe, #A13-2031, (Minn. Ct. App. Oc. 20, 2014), the Minnesota Court of Appeals held that an order modifying parenting time so that the non-custodial parent has more time with the child over the summer break than the custodial parent is not considered a modification of the child’s primary residence absent a specific indication from the court that the order is intended to modify custody or change the primary residence of the child when the custodial parent has more time with the child during the school year. Further, such a change in parenting time is not considered a restriction of the custodial parent’s time, as the custodial parent has more time with the during the school year. However, the court did reverse the district court in part, holding that a court must provide an explanation if it modifies a parenting time schedule for holidays that gives the non-custodial parent exclusive parenting time on all school breaks as well as Thanksgiving, Christmas, and New Year’s Even.

Specifics of the Case

In this case, the initial 2008 custody order gave the parents joint legal custody with the mother having sole physical custody of their eight-year-old child and the father having parenting time on Monday and Tuesday evenings during the school year and during the summers from Sunday to Tuesday, and every other weekend throughout the year, with the holidays being divided and each party having two weeks of uninterrupted vacation time during the summer.

That schedule worked until the mother remarried and moved from Dundas to Ramsey in Anoka County, which is 64 miles from the father’s location and about 75 miles from her prior home. With travel time of more than an hour from the school to the father’s home, providing the father with parenting time during the school week became impractical. Therefore, the mother moved to modify parenting time and transportation so that the father’s weekday parenting time would be eliminated, giving the father alternating weeks during the summer, splitting the holidays, and retaining the two weeks of vacation time. She also proposed splitting the transportation; the prior order had provided for the father to provide transportation if he moved out of the original hometown, Northfield.

 

In response, the father also asked for modifications. He asked that, instead of splitting transportation, the child live with the mother during the school year, with parenting time for the father every other weekend, and during the summer, the child would live with the father and the mother would have the child every other weekend, and that the holidays be divided between the parties.

 

Court Denies Mother’s Motion

 

At the hearing, held in June 2013, by which time the child was approximately thirteen, the court denied the mother’s motion and granted the father’s motion. The mother appealed, contending that could have allowed the father to custody had been modified without the required evidentiary hearing and sufficient findings as required by Minn. Stat. Section 518.18(d).

 

The court held that the district court did not modify custody or change the child’s primary residence but instead just modified parenting time in response to the mother’s move with the child. The court emphasized that the father was still required to provide child support during the summer; if the father had physical custody, the court could have allowed the father to suspend child support payments during the summer. Minn. Stat. Section 518A.26, subdivision 14.

 

Further, the family law statutes do not define primary residence. The court found the mother’s home continued to be the child’s primary residence as the child lives with her mother and attends school in her mother’s school district nine months of the year.

 

This case reveals the risks inherent in moving to modify custody. The mother filed the motion to modify yet the father wound up prevailing on his cross-motion.   Both the Minnesota Court of Appeals and the district court found her position, that the father’s parenting time should be reduced during the school year without any corresponding increase during the summer, was unfair to the father, given that the change was needed because the mother moved.   She did win on the holiday time because the court found that giving the father all the holidays and school vacations without any explanation was unfair.