Under Minnesota law, all property acquired during a marriage is presumptively marital. To overcome this presumption, the party claiming that an asset is non-marital has to demonstrate that it falls into one of the non-marital categories.
There are three main categories of non-marital property:
1. Property acquired before the marriage or after the “valuation date.”
2. Property given as a gift or inheritance from a third party to one spouse but not the other.
3. Property acquired in exchange for non-marital property from one of the above categories.
As an example, a necklace that I owned before the marriage would be my non-marital property. Likewise, if I sold the necklace and bought a ring with the money, the ring would be non-marital property. Similarly, if I inherited $50,000 from by grandparents, that money, and whatever I purchased with it, would be non-marital. It is important to note that if you sell or exchange property you will need to “trace” the non-marital interest from one asset to another.
Sometimes property will have both marital and non-marital components. For example, if I used that $50,000 inheritance as down payment on a house, and my spouse and I then pay down the mortgage for a number of years during the marriage, a portion of the equity would be marital and a portion would be non-marital. (The precise amount of the non-marital interest would be calculated using something called the Schmitz formula – the specifics of which will be dealt with another time).
Determining what property is non-marital is important, because such property is typically awarded solely to the person having the non-marital interest. There is a provision in the law that allows the court to give up to one-half of a party’s non-marital property to the other spouse to avoid “undue hardship,” but this is only very rarely done.
To discuss property division during a divorce, contact Kruse Family Law at 612.231.9865, or email firstname.lastname@example.org.