One of the most contentious issues to be resolved in a Minnesota divorce is the division of property. It is important to understand that most property obtained during a marriage is considered part of the “marital estate” and subject to a just and equitable division by a court.  However, just because an asset was acquired during the marriage, does not automatically mean it is a part of the marital estate.

Exceptions to Marital Property in Minnesota

When one partner in a marriage inherits property, this property is typically considered non-marital property.  Many assets have both marital and non-marital components.  For example, if someone inherited $100,000 and used those funds to put a down payment on a home, the down payment would be considered non-marital property.   Other types of non-marital property include:

• Assets identified in prenuptial agreements – some couples elect for prenuptial agreements and may identify specific assets that belong to one person or another. Any assets so designated will remain non-marital property.
• Personal injury settlements – if either spouse was awarded monies in a personal injury case, the proceeds for some types of damages such as pain and suffering may be designated as a non-marital asset.
• Gifts to one spouse – gifts from family and non-family members for birthdays or other holidays that are specifically for one spouse will typically not be considered marital property.

Proving Non-Marital Assets Using Tracing in Minnesota

Most courts will simply not take our word when designating property as a non-marital asset. Instead, it will be up to the party who is claiming the asset as non-marital property to prove the non-marital nature of the property.  Let’s use the above $100,000 as cash in an account of one spouse at the time of the marriage instead of an inheritance. Now let’s assume the couple purchases a home for $300,000 and the $100,000 was used as a down payment. The couple’s home is sold for $500,000 and has a $100,000 mortgage.

In most cases, this scenario would mean that each partner was entitled to $200,000 (balance of $400,000 after mortgage payoff and not including closing costs, brokers fees, etc.) from the sale of the property. However, the spouse who invested $100,000 has proof through bank statements, cancelled checks, and closing statements evidencing his or her $100,000 down payment from their non-marital inheritance. The spouse would need to complete a non-marital tracing which would link through appropriate documentation the non-marital inheritance to the down payment made on the home.  With this proof, the spouse who made the down payment would have both a non-marital and marital interest in the home.

Understanding the Schmitz Formula in Property Division

In Minnesota, the Schmitz formula is applied to determine the marital/non-marital nature of different assets.  The Schmitz formula is:

The present value of a nonmarital asset used in the acquisition of marital property is the proportion the net equity or contribution at the time of acquisition bore to the value of the property at the time of purchase multiplied by the value of the property at the time of separation. The remainder of equity increase is characterized as marital property * * *.

Different situations such as refinancing of a home or making improvements to a home may impact the Schmitz formula and the non-marital interest in a home.  Your Burnsville family law attorney can help you determine whether or not this applies to your situation.

There are many issues to deal with when you are considering divorce including property division. When one partner has significant assets prior to the marriage, has inherited money or property or has valuables gifted to them during the marriage, property division is even more complicated. If you are contemplating a divorce and are concerned about protecting your assets, contact Matthew J. Gilbert and Charlie R. Alden of Gilbert Alden PLLC. Our goal is to serve as a true advocates and help protect you through the divorce and property division process.