Division of Marital Property

Minnesota Couple Going Through a Divorce

Division of Property After a Divorce

A major source of confusion for many family law clients concerns the division of marital assets. A frequent question arises when one spouse claims that the other spouse is not entitled to be awarded a specific piece of property simply because the property is titled in only one spouse’s name.

Marital Property

In Minnesota, whether an asset is titled in both parties’ names or only in one party’s name has very little to do with how it is allocated in a divorce. Rather, the relevant distinction is between “marital” and “nonmarital” property. Basically, the general rule is that marital property means all property (i.e., real property and personal property) acquired by either of the parties at any time during the existence of the marriage, but prior to the date of valuation. Minnesota law presumes that all property falling within this classification is marital property regardless of whether title to the property is held individually or by the spouses jointly.

The “valuation date” is considered to be the date 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. In those counties where an Initial Case Management Conference is scheduled, that date is typically considered to be the valuation date.

Nonmarital Property

An exception to the general rule above is that the other spouse typically will not have a claim to a particular piece of property if it meets the definition of “nonmarital property” (although this is not always the case). “Nonmarital property” means property that is acquired by either spouse before, during, or after the existence of the marriage, which:
  • is acquired as a gift, bequest, devise or inheritance made by a third party to one spouse, 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 above;
  • is acquired by a spouse after the valuation date; or
  • is excluded by a valid antenuptial contract.

Importantly, the party arguing that a specific piece of property (for example, a car, house, retirement account, bank account, etc.) is nonmarital has the burden of overcoming the statutory presumption in favor of marital property.

Allocation of Marital Property

Once property is properly assigned a “marital” or “nonmarital” designation, then the parties (or the court if the parties are unable to agree) must allocate that property in a “just and equitable” manner. Although “just and equitable” does not automatically mean dividing the marital assets in “50/50” fashion, typically it works out to be quite close to that ratio (all other things being equal). However, some situations may warrant an allocation of a disproportionate share of the marital assets to one party in order for the other party, for example, to obtain an agreement to waive future spousal maintenance.If the parties cannot agree on the division of marital property, then the court uses several factors to make its decision, 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, opportunity for future acquisition of capital assets, and income of each party. It is also important to keep in mind that the overall division of marital property is made without regard to marital misconduct.

Property Having Marital and Nonmarital Interests

Although the laws governing the division of marital property seem relatively straightforward on paper, they can become somewhat murky in practice. This is especially true if a piece of property has both a marital and nonmarital component to it. This primarily occurs when one party brings a specific item of property into the marriage, and then that item appreciates in value. In these cases, a distinction is typically made between “active” appreciation and “passive” appreciation.Active appreciation is generally considered to be appreciation that occurs through the efforts of one or both parties during the marriage. For example, in situations where one party owns a house prior to the marriage and the parties then reside in that house after they are married, it is likely that there will be both a nonmarital and a marital interest in the home if the parties use marital funds to make mortgage payments on the house or if the parties make capital improvements to the home. In these types of situations, a different formula is used to calculate the respective nonmarital and marital values of the property in order to equitably allocate the asset (or the value of the asset).

Conversely, passive appreciation is an increase in value of an asset that occurs through no effort of the parties. For example, a baseball card collection or a rare painting that was purchased prior to the marriage by one of the parties may appreciate in value during the course of the marriage through no effort of the parties. This type of passive appreciation would likely be considered to be nonmarital even though the item appreciated during the marriage. In this case, the property would typically be considered to have retained its entire nonmarital character.The facts of a specific case can become even more complex when as asset appreciates in value during the marriage due to both active and passive appreciation. The attorneys at JUX Law Firm have experience dealing with these types of issues and can assist you in understanding how the law relates to your specific factual situation.