Property Division in Minnesota Divorce | Fair Division Requires Careful Analysis
Property division often looks like a math problem, but Minnesota law requires judgment calls that affect long-term financial stability. Important details below the surface can materially affect the result.
Marital Property vs. Non-Marital Property in Minnesota
Minnesota is a marital property state, not a community property state. This means that in Minnesota, property acquired during the marriage, called “marital property,” is typically divided “equitably” (which does not necessarily mean “equally”). Property owned prior to the marriage, or property obtained through inheritance or gift, is “non-marital property” and is usually awarded to the spouse who owned it at the time of marriage, or who received the inheritance or gift.
Tracing Non-Marital Property in Minnesota
A common problem encountered in Minnesota property division cases is that property can have both a marital and non-marital component. Minnesota divorce law allows parties to “trace” their non-marital property. For example, if a person owns equity in a home prior to the marriage and continues to pay the mortgage payment during the marriage, with marital income, the home has non-marital and marital components. This is a simplified example. The party who owned the home prior to the marriage owns the non-marital component. Both parties each own half of the marital component. This analysis is true not only for real property, but for pension assets, investment assets, business interests – any asset that one spouse owned prior to the marriage.
Tracing a non-marital claim in a home, pension asset, or other property, can be confusing. Without a clear understanding of how tracing works, a person getting divorced in Minnesota can end up with a property division that is unfair. Tracing requires documentation, and when documentation is not complete, an experienced attorney will try to find an alternative way to prove the non-marital claim.
Valuing a Business in Minnesota Divorce
Sometimes divorce cases involve a business operated by one spouse but not the other. Typically, a financial expert is retained to value the business. However, there are several generally accepted methods for business valuation, which can result in different values. I have participated in, and reviewed, countless business valuations, and I know that it is important to select a valuation professional who uses a method that is fair to my client. The method must be both reasonable and supportable, not just advantageous.
When Courts Can Consider Non-Marital Property
In limited circumstances, Minnesota courts can invade the non-marital property of one spouse to prevent the other spouse from experiencing significant financial hardship. This happens infrequently, and it depends upon the facts of the case, including the length of marriage; the age and health of a party; their occupation, income and employability; marital assets awarded to that party, and other factors.
Tax Considerations in Property Division
In Minnesota, attorneys prepare balance sheets to assist an evaluator or judge in deciding how to fairly divide property. There can be a hidden and unfair benefit to a spouse if future tax debts, and responsibility for payment of those future tax debts, are not considered. Careful planning can prevent unintended and avoidable outcomes.
If you want to understand how the rules of property division apply to your situation, I can help you think through the issues and options. Call me at (952) 270-7700 to schedule an initial consultation.
