Divorce is not just the end of a marital union but also the separation of two entire lives, including the property that makes up the couple’s marital estate. The goal of any divorce proceeding is a just and equitable division of all marital property. In many cases, an equitable property division may be an equal division of debts and assets. However, a variety of factors can impact what a court may ultimately determine to be an equitable property division. In looking at property division in a dissolution of marriage action, the first step is determining what is considered “martial property” verses what is considered “Non-marital Property”.
All property or debts acquired after the marriage and before the valuation date is presumed to be marital property and subject to division at the time of divorce regardless of title. For example, a car or retirement account held in one spouse’s name only will be considered marital property if it was acquired during the marriage. The valuation date is the date the Court sets for the division of property and the date upon which the value of each piece of property is determined. This date is generally the date of the Initial Case Management Conference. It may be possible to claim that certain property is non-marital if it was acquired prior to the marriage or gifted or inherited during the marriage. The spouse seeking to establish that property is non-marital has the burden of proving the asset is non-marital and tracing that asset to a non-marital source as discussed in greater detail below.
In making its determination of what constitutes an equitable division of marital property, the court must consider all relevant factors and the statutory factors, which include:
- length of marriage;
- any prior marriage of a spouse;
- age of each spouse;
- health of each spouse;
- station and occupation of each spouse;
- amount and sources of income of each spouse;
- vocational skills and employability of each spouse;
- estate of each spouse;
- liabilities and needs of each spouse;
- opportunity for future acquisition of capital assets for each spouse;
- contribution of each spouse in the acquisition, preservation, depreciation, or appreciation in the amount or value of the marital property; and
- contribution of a spouse as a homemaker.
If a spouse can prove that part of the parties’ estate is non-marital property, that property will normally not be subject to division as part of the marital estate.
Non-marital property is real or personal property acquired before, during or after the marriage, which:
- is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse;
- is acquired before the marriage;
- is acquired in exchange for or is the increase in value of property which is described in clauses (1), (2), (3), and (5);
- is acquired by a spouse after the valuation date; or
- is excluded by a valid antenuptial agreement.
In some cases, assets may have both marital and non-marital components. For example, it is not uncommon for 401(k) accounts or even the marital homestead to have pre-marital values. To determine the value of nonmarital interests the court may distinguish between active and passive appreciation. In the case of a homestead, the courts apply a formula, which provides that a spouse’s nonmarital interest in a homestead purchased prior to the marriage is equal to the proportion the spouse’s net equity at the time of marriage bore to the value of the property at the date of marriage. This is often referred to as the “Schmitz” formula. Depending upon the type of asset and the particular circumstances of each case, nonmarital claims may be complex to establish.
In some cases, if the circumstances warrant, the court may award up to one-half of a spouse’s nonmarital property to the other spouse if necessary to avoid an unfair hardship on the other spouse. In determining whether an unfair hardship exists, the court must consider all factors including “the length of the marriage, any prior marriage of a spouse, 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 the income of both parties.” The court is allowed significant discretion in making determinations on equitable property divisions and on determining whether unfair hardship exists.
Non-marital tracing can be a complicated endeavor, and it is crucial that the non-marital interest be traced and defined as fully as possible for the Court to comprehend it and rule appropriately.
The attorneys at Arnold & Rodman PLLC have the background and legal experience to help you examine and analyze your marital estate, and can then skillfully advocate for the fairest division of property possible.
Author: Kendal K. Gregg, Esq.
Source: 2012 Minnesota Statutes 518.58: DIVISION OF MARITAL PROPERTY, revisor.mn.gov