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Property Division: What Can I Keep & What Must be Divided?

So you find yourself either contemplating divorce, or in the middle of a divorce and need to know what your rights are with regard to all the personal and real property owned by you or your spouse. This blog will touch on the “ins and outs” of property division in divorce proceedings consistent with the laws of the State of Minnesota. There are two competing doctrines among the various States on how property rights are vested to married couples: “common law property” states and “community property” states. Minnesota is considered a common law property state or “marital property” state. In the United States, there are ten States that are considered “community property” states, which include, Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. This article deals specifically with common law property rights within Minnesota.

So you find yourself either contemplating divorce, or in the middle of a divorce and need to know what your rights are with regard to all the personal and real property owned by you or your spouse. This blog will touch on the “ins and outs” of property division in divorce proceedings consistent with the laws of the State of Minnesota. There are two competing doctrines among the various States on how property rights are vested to married couples: “common law property” states and “community property” states. Minnesota is considered a common law property state or “marital property” state. In the United States, there are ten States that are considered “community property” states, which include, Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. This article deals specifically with common law property rights within Minnesota.

As a Minnesota divorce attorney, it is critical to meet thoroughly with divorce clients to learn all the property interests owned by the divorcing couple and the “character” of those property rights. All property will be classified as either “marital property” or “non-marital property.” There is a presumption in the law that all property is marital. Thus, it becomes the burden of the spouse attempting to classify the property as non-marital to come forth with the necessary proof and evidence to consider the property non-marital.

So – what the heck am I talking about? What do I mean by marital property? . . . And non-marital property?

Per Minnesota divorce laws, all marital property shall be divided equitably between the divorcing spouses. Marital property consists of all property owned by the spouses that is not otherwise classified as non-marital property as explained below. To “equitably divide” the marital property does not necessarily mean to divide the property 50-50 between the spouses. However, in the majority of the Minnesota divorce cases, this is exactly what happens. But, if there is a large disparity in the spouses’ incomes, the Courts may award to the lower wage earner a higher percentage of the marital property.

So, what is non-marital property? In Minnesota, non-marital property consists of (a) any property that a spouse owned prior to the marriage; (b) any property that a spouse inherited at any time, either before or during the marriage; or (c) any property that was gifted directly and solely to one of the spouses (except gifts from the other spouse). If property is classified as non-marital, then that spouse is entitled to all of such property, without having to divide any portion of it with the other spouse.

To prove the non-marital character of tangible personal property is oftentimes not that difficult. However, when we are dealing with various bank accounts, retirement accounts or investment accounts, things get a little trickier. The spouse must properly and thoroughly “trace” the non-marital funds from their inception through the date of divorce. If the non-marital funds are commingled with marital funds, then that has the effect of converting the funds to marital funds. Thus, it is very important that the holder of non-marital funds retain such funds in a separate account . . . however, it may not be the most pleasant conversation to have with your spouse when you explain why you are retaining the funds in a separate account: “Honey – I am just keeping the money in a separate account, so in case we get divorced I will get to keep all the money.”

Similarly, if a spouse has a non-marital claim in real estate, it can be difficult to trace such a claim. This comes about when one spouse owns a home prior to the marriage, which has equity, then the parties sell that home and use the proceeds from the sale as a partial down payment towards the new home, and so forth and so on. There are many factors that come into play with this – too many to discuss in this article. However, it should be noted that when computing a potential non-marital claim in real estate, the Courts discern “active appreciation” (i.e. appreciation of the property due to improvements) with “passive appreciation (i.e. appreciation of the property due to market forces). Further, if at any time during the course of owning the real property, the actual equity in the property is reduced to zero, then this has the effect of eliminating any non-marital claim that may have existed.

As you can see, it can become quite complex when determining whether any non-marital property exists as part of the marital estate. It is always important to speak with a qualified Minnesota divorce lawyer to discuss your rights with regard to property and all other divorce issues. .