Minnesota is an equitable distribution state. That means that all of the marital assets are put into a pot (or onto a balance sheet) and equitably divided between the partners to the marriage. Most often, assets are divided on a roughly equal basis, although under some uncommon circumstances, including undue hardship, one spouse may be awarded more than mathematically 50% of the marital estate.
But what exactly is the marital estate? Is it everything the parties own, jointly and/or separately?
As always, the answer is – it depends. “Marital property” and “nonmarital property” are defined in Minn. Stat. § 518.003. Simply put, marital property means any property acquired by the parties, or either of them, during the existence of the marriage, but prior to the date of valuation established during the divorce.
All property is presumed to be marital regardless of whether title is held individually or jointly. “The presumption of marital property is overcome by a showing that the property is nonmarital property.” Id.
“Nonmarital property” means any property acquired by either spouse before, during or after the marriage which is acquired as a gift or inheritance to one spouse; is acquired by one spouse prior to the marriage; is acquired in exchange for or is the increase in value of other nonmarital property; is acquired by a spouse after the valuation date; or is excluded by a valid antenuptial contract. Id.
A spouse claiming a nonmarital interest in property must demonstrate that the property in question falls into at least one of these specific categories. Each category appears relatively straightforward, but complications often arise. The most common complication is called “commingling,” and occurs when the asset in question is mixed, or commingled, with marital assets to such an extent that it loses some or all of its nonmarital character.
Commingling most often occurs when the asset in question is fungible, or mutually interchangeable. Money is an example of a fungible asset, meaning if you mix up nickels from various sources in one piggy bank, you can’t tell which nickels came from your inheritance (nonmarital) and which nickels you earned on your paper route during the marriage (marital). Even where the asset in question is fungible, however, an analysis can sometimes be undertaken to show that some percentage of the total asset is nonmarital.
When either party has a significant claim or claims involving nonmarital property, it will be important to go back to the source of the property and trace its path through the dissolution process. Remember: the party making the nonmarital claim has the burden to prove that the property in question fits into one of the categories outlined in the statute (and above). While documentation is not always necessary, the claim will be much stronger if documentation exists and can be produced. Often, a financial expert should be retained to trace complex nonmarital property claims.
If you believe you have a substantial nonmarital interest in assets, it will be important to locate any documentation supporting your claim as soon as possible, as well as to take steps to segregate the nonmarital property to the extent you can. Account statements, closing documents, gift letters, even witness statements can all be helpful. Some proactive work in tracing these assets can save you money and time in your dissolution of marriage and protect assets that truly are nonmarital.