Understanding Marital and Nonmarital Property

One of the primary issues that will need to be resolved in a divorce is the division of property between the parties. In Minnesota, property that gets divided between the parties in a divorce is called marital property. Property that belongs exclusively to one spouse or another is called nonmarital property, and is sometimes referred to as “separate” property. Nonmarital property is not subject to division in a divorce, and remains with the person to whom it originally belonged.

Not only are people sometimes confused about what constitutes marital and nonmarital property, they are often surprised to learn that the nature of property can change from one state to another, depending on the actions of a husband or wife.

If you're thinking about divorce in Minnesota, it's worth your while to develop a basic understanding of marital and non-marital property.

Basics of Marital and Nonmarital Property

It's easiest to begin by assuming that most property that is acquired by a husband or wife during the marriage is considered marital property in Minnesota. This is true even if it's earned exclusively by one party and kept separate during the marriage. For example, let's say a wife receives a performance bonus at her job every quarter, and deposits that bonus in a separate bank account that only she has access to. Even if she has done this for twenty years with her husband's knowledge and without his objection, those funds are still going to be considered marital property.

Nonmarital property is an exception to the general rule that all property acquired during a marriage is subject to a fair and equitable division between the parties upon a divorce. Some property that would be considered nonmarital includes:

• Property acquired by gift by one spouse or inheritance from someone other than a spouse;
• Property one spouse acquired before the marriage;
• Property acquired by one spouse after the valuation date for marital property;
• An increase in the value of any of the above types of nonmarital property.

Let's say your sister gave you five thousand dollars for your birthday, or that a month before your wedding you cashed in a lottery ticket for five thousand dollars, or that you received a five thousand dollar bequest from your great-aunt Edna. In any of those instances, the five thousand dollars would almost certainly be considered nonmarital property. Furthermore, if you took that five thousand dollars, invested it in shares of stock held in your name only, and it increased in value to fifty thousand dollars during your marriage, the increase in value would still be considered nonmarital property.

However, many people don't take their nonmarital property and keep it separate during their marriages. Many people combine their assets when starting a new life together. What if you took your thousand dollar gift, bequest, or winnings and happily plunked it in your joint checking account with your spouse? And what if, over the years, you and your spouse put more money into the account and took some money out to spend or purchase things?

The answer is that you have “commingled” what was once nonmarital property with marital property, and it has, by your actions, may have become marital. Just as if you had a bucket of water and poured in a cup of water from another source, it would be impossible to separate out that same cupful once it had gone into the bucket. Courts will generally treat commingled assets the same way.

Protecting Your Nonmarital Assets

There are a number of ways that you can protect assets that were originally nonmarital in case of a divorce. One is a prenuptial agreement that specifies what will happen to certain property in the event of a divorce. Such an agreement, as long as it meets legal requirements for validity, becomes the “private law” of your marriage and divorce.

Another way to protect nonmarital assets is to hold them apart, in a separate account. The more documentation you have to trace an asset, the more likely that a court will allow you to claim it as nonmarital. For instance, let's say you sold your childhood baseball card collection for five thousand dollars and used that five thousand dollars to buy a motorcycle during your marriage. A paper trail showing the sale of the nonmarital asset and the use of those funds to buy a different asset is your best hope of having the motorcycle declared a nonmarital asset by the court, despite its purchase during the marriage.

Remember, too, that some assets can be considered partly marital and partly nonmarital, such as a pension fund that you began paying into before your marriage and kept paying into afterward. Only the marital portion would be subject to division in a divorce.

Of course, it's not always cut-and-dried what constitutes marital or nonmarital property. If you are concerned about the status of your property in a divorce, it's best to talk to a qualified Minnesota divorce attorney. Contact Bloch and Whitehouse, P.A. at (952) 224-9977 to schedule a free initial consultation.