NON-MARITAL PROPERTY IN MINNESOTA
Many are aware that during a divorce a couple's assets are each labeled as either "marital" or "non-marital." In Minnesota, non-marital property is usually not divided by the court during the divorce proceedings, unless it has been comingled with marital assets or a party establishes there would be an unfair hardship not to award a portion of the nonmarital asset to the opposing spouse. In other words, if an asset is deemed non-marital it will go to the spouse who it belongs to without off-setting contributions to the other spouse per equitable distribution rules. All of this means that it is in each partner's best interest to have items traced, substantiated, documented and identified as non-marital where appropriate. To look at the Minnesota statutes on this subject yourself, please click here.
So what counts as non-marital property?
A legal professional can take a look at your exact situation to determine how it may be classified by the court. However, in general, things like gifts made during marriage to one spouse or an inheritance to one spouse is an example of non-marital property. Importantly, assets that are in your name before a marriage generally are non-marital if they are not comingled during the marital relationship. In more complex cases an asset may be partially marital and partially non-marital. For example, one spouse may have owned a house before the marriage, but the subsequent mortgage payments may have come from marital funds after the marriage, or the nonmarital component may be lessened or eliminated by refinancing the property and withdrawing equity, or by making substantial, material improvements paid for with marital monies during the marriage.
How do you prove property is non-marital?
One of the more complex aspects of this property distribution involves the idea of "tracing" non-marital property. Tracing is a "connecting the dots" process where one party tries to show that an asset was non-marital from the start and remained so throughout the relationship. Co-mingling may break the connection and render the asset (in whole or in part) as marital. This idea is often easiest to understand in the context of bank accounts. If one partner had a personal account before the marriage, that account may be non-marital if it was not co-mingled with other funds throughout the relationship. Proving this might be accomplished by showing bank statements with information about account transactions (or lack of transactions) throughout the marriage. If marital funds remained separate, then the account may be deemed non-marital for property distribution purposes.
Importantly, however, a court has significant discretion in these matters. In fact, even if an asset is deemed to be non-marital, the court may, in its discretion "invade" a part of those non-marital assets (usually up to one-half) if desired for equitable purposes.
In a 2008 Minnesota Supreme Court Case, Baker v. Baker, the court examined whether the investment return on the non-marital portion of certain retirement accounts is also considered non-marital property. The court determined the status of property, as marital or non-marital, is dependent upon the extent to which marital effort goes into increasing the property’s value. In other words, the court will look at whether one or both spouses put in financial or non-financial effort to make the property more valuable. In this case, the court determined that the retirement account investment returns were not marital property because no marital effort was expended to increase the value of the retirement funds at issue.
As the brief summary of the issues above make clear, it is critical to the assistance of an experienced divorce lawyer to help with these property issues.