Calculating Non-Marital Interest in a Minnesota Divorce
Calculating Non-Marital Interest in a Minnesota Divorce
Divorce is a complex process that involves dividing assets and debts acquired during the marriage. One particularly intricate aspect is determining and calculating non-marital interest in assets. In Minnesota, understanding how to identify and calculate non-marital interest is crucial for ensuring a fair and equitable distribution of property. This article provides an in-depth guide to help you navigate this challenging area of family law.
What is Non-Marital Property?
Non-marital property refers to assets and debts that one spouse acquired before the marriage, after the valuation date, or by gift or inheritance to one spouse alone during the marriage. According to Minnesota Statutes Section 518.003, subd. 3b, non-marital property can include:
Property acquired before the marriage.
Gifts or inheritances received by one spouse during the marriage.
Property acquired in exchange for or the increase in value of non-marital property.
Property acquired by a spouse after a legal separation.
Certain parts of personal injury awards.
Determining non-marital property is the first step in calculating non-marital interest.
Identifying Non-Marital Property
The burden of proving that property is non-marital lies with the spouse claiming the non-marital interest. This process involves:
Documentation:
Gathering evidence such as purchase receipts, bank statements, deeds, and other financial documents that demonstrate the acquisition of the property before the marriage or through inheritance/gift.
Tracing:
Tracing involves showing a clear link between the current property and its non-marital origin. For example, if a non-marital asset was sold and the proceeds were used to buy another asset, you must trace the funds from the sale to the purchase.
Commingling of Assets
Commingling occurs when non-marital and marital assets are mixed, making it challenging to distinguish between the two. However, if the non-marital origin can be sufficiently traced, the property or its proportional value may still be considered non-marital. For example, if a non-marital inheritance was deposited into a joint bank account but kept separately identifiable, it could retain its non-marital status.
Calculating Non-Marital Interest
Step 1: Establishing the Value of the Non-Marital Property
Determine the fair market value of the property at the time it was acquired as non-marital. This initial value is essential for calculating the non-marital interest.
Step 2: Determining the Value Increase
Identify the increase in value of the non-marital property during the marriage. This can include appreciation due to market conditions, contributions of marital funds, or efforts by either spouse. This is often most easily calculable for investment accounts or other similar assets, while for assets such as real property (for example, a marital home) this can be more difficult in some cases.
Step 3: Allocating the Increase in Value
The increase in value of non-marital property during the marriage can be classified as marital, non-marital, or a combination of both. Courts often use the Schmitz formula to allocate this increase:
Initial Value + ([Initial Value Value / Value at Divorce] × Increase in Value During Marriage) = Non-Marital Interest
This formula helps determine the non-marital portion of the increased value of an asset. Any remaining increase in value would be considered marital property.
Example Calculation
Let's consider an example where one spouse had a non-marital asset valued at $50,000 at the time of marriage. By the time of divorce, the asset is worth $100,000, with $30,000 of the increase attributable to market conditions and $20,000 to marital efforts or funds.
Initial Non-Marital Value: $50,000
Total Value at Divorce: $100,000
Increase in Value: $50,000 ($100,000 - $50,000)
Using the Schmitz formula:
Non-Marital Interest ($50,000) + (Initial Value ($50,000) / Value at Divorce ($100,000) x Increase in Value During Marriage ($50,000)) = $75,000
So, $75,000 of the asset is considered non-marital, and the remaining $25,000 is marital.
Factors Influencing Non-Marital Interest Calculations
Several factors can affect the calculation of non-marital interest, including:
Contribution of Marital Efforts:
If marital efforts or funds contributed to the increase in value, this portion might be considered marital.
Improvements or Maintenance:
Enhancements or upkeep performed during the marriage can impact whether the increased value is deemed marital or non-marital.
Market Conditions:
Appreciation due to market conditions alone often retains its non-marital character if it can be traced back to the original non-marital asset.
Legal Assistance and Expert Testimony
Calculating non-marital interest can be complex, often requiring expert testimony, such as forensic accountants or appraisers, to provide accurate valuations and trace the origins of assets. Consulting with an experienced family law attorney is essential for navigating this process and ensuring a fair distribution of property.
Conclusion
Understanding and calculating non-marital interest in a Minnesota divorce involves careful documentation, tracing of assets, and application of legal principles. By thoroughly identifying non-marital property and accurately determining its value and increase during the marriage, you can ensure an equitable division of assets. If you are facing a divorce and need assistance with these matters, contact Roach Law PLLC for expert guidance tailored to your unique situation. Experienced family law attorney John E. Roach is here to help you navigate the complexities of divorce and property division in Minnesota.