Examples of Equitable Distribution in a Minnesota Divorce
When a married couple in Minnesota decides to divorce, one of the most complex issues they must resolve is how to divide their marital property and debts equitably.
Minnesota is an “equitable distribution” state, which means the court will divide marital assets and debts in a fair and just manner, but not necessarily equally.
What is Equitable Distribution?
Equitable distribution is a legal process courts use to divide property and debts acquired during the marriage. It involves identifying marital property that is subject to distribution, valuing those assets and obligations, and dividing them equitably between the spouses. The goal is to ensure the property division is fair after considering all relevant circumstances.
The majority of states, including Minnesota, use equitable distribution to divide property in divorce. This differs from community property states, where marital property is automatically split 50/50.
Under equitable distribution law, martial property generally includes:
- Assets purchased during the marriage with marital funds
- Income and increases in value of assets acquired during marriage
- Gifts given to the couple during marriage
- Retirement benefits accrued during marriage
Separate property that is not subject to equitable distribution may include:
- Assets owned before the marriage
- Inheritances and gifts gifted to one spouse
- Settlements for personal injury to one spouse
- Increase in value of separate property
However, separate property can become marital property if it becomes commingled. For example, if one spouse puts their inheritance into a joint bank account.
How Courts Decide Equitable Division Factors
When it comes to dividing marital property in divorce, equitable does not necessarily mean equal. The court has discretion to divide assets equitably after considering relevant factors like:
- Each spouse’s contribution to acquiring assets
- Caring for children and homemaking contributions
- Economic circumstances and income potential
- Health and employability of each spouse
- Marital misconduct like hiding/wasting assets
- Tax consequences
While one spouse may get the marital home, the other may be awarded retirement accounts of similar value for an overall equitable division.
Examples of Equitable Distribution in Action
To better understand equitable distribution, let’s look at a few examples of how marital property division may work in real divorce cases:
Scenario 1: Long-Term Marriage with a Stay-at-Home Spouse
John and Jane were married for 25 years. Early in the marriage, they decided Jane would stay home to raise their three children while John worked. Now they are divorcing.
During the marriage, John worked full-time and earned a good salary as an engineer. Nearly all assets, including their house, retirement accounts, investments, and savings accounts, were acquired using John’s income. Jane cared for the home and children full-time and did not have any outside earnings.
In this case, the court will likely recognize Jane’s long-term contributions as a homemaker and award her a greater share of the marital assets even though John earned the income. She gave up her own career prospects to care for the family, allowing John to focus on advancing his career. Although she did not directly acquire the assets, her indirect contributions still have value.
Jane may be awarded 60-70% of the marital assets. She will also likely receive alimony to provide for her financial needs since she has minimal recent work experience and income potential.
Scenario 2: Shorter Marriage with No Children
Mark and Susan were married for 5 years and have no children together. Mark works as a software developer, earning $120,000 per year. Susan has worked full-time as a physical therapist throughout the marriage, earning $80,000 per year.
They purchased a home together 3 years ago for $300,000, putting down $60,000 they had saved jointly while married. The remainder of the purchase was financed through a mortgage in both their names. Mark and Susan maintained separate bank accounts during their marriage and acquired no other joint marital assets.
For a shorter marriage with dual incomes and no children, the court will likely find an approximately equal division of assets to be equitable. Susan contributed to the $60,000 downpayment from her own earnings. She also helped pay the monthly mortgage from her income, even though it was not a joint account.
The equity in the home will be divided close to 50/50 or proportionally based on their respective incomes. Other assets owned individually will be granted to each spouse since they were kept separate during marriage. Neither spouse will receive spousal support since both have stable incomes.
Scenario 3: Divorce Involving Marital Misconduct
Sarah files for divorce from her husband, Michael, after finding out he had an affair. They were married for 12 years and have an 8-year-old daughter together. Michael works full-time, earning around $90,000 per year. Sarah worked part-time during the early years of their marriage but left her job after having a child. Recently, she started working part-time again, earning about $30,000 per year.
In this case, the court may consider Michael’s marital misconduct as a factor when dividing property. His affair led directly to the divorce. Sarah gave up career opportunities to care for their child. Even though they both work, Michael earns significantly more income.
The court will likely award Sarah 55-60% of marital assets, a greater share of Michael’s retirement accounts, and a portion of spousal maintenance to even out their incomes and compensate Sarah for the difficulties arising from the affair.
Using Equitable Distribution to Divide a Business or Professional Practice
For spouses who owned and operated a business or professional practice during marriage, dividing these assets equitably can be more complex. The court may need to determine issues like:
- Valuing the current business or practice
- Separating personal goodwill tied to one spouse from enterprise goodwill
- Dividing passive income sources like buy-sell agreements
- Compensating a spouse for supporting the business
For example, Steve started a dental practice early in his 25-year marriage to Michelle. Using marital funds, he bought an office building and equipment for the practice. Michelle helped get the practice up and running by handling administrative tasks. Now that they are divorcing, the practice is worth $1 million.
The practice itself is marital property since it was acquired during the marriage using marital funds and Michelle’s efforts. The court will likely award the practice to Steve since it is tied to his profession. However, Michelle will be compensated for her direct and indirect contributions to building the practice’s value. She may be awarded 40% of the practice’s fair market value along with spousal maintenance.
Modifying an Equitable Distribution Ruling
Under certain circumstances, an equitable distribution order can be modified after a divorce is finalized. This requires filing a motion to reopen the judgment and showing specific conditions exist, such as:
- Discovery of assets that were unknown or concealed during divorce
- Changes in asset valuation
- Misrepresentation or failure to disclose assets
- Mistakes or malfeasance that caused inaccurate property distribution
If approved, the court can issue a new equitable distribution order. There are strict time limits, usually 1-2 years after divorce, to request a modification.
Working With a Divorce Attorney on Property Division
Dividing marital assets and debts equitably can be extremely challenging, especially with complex estates. It is highly advisable to have an experienced Minnesota divorce lawyer assist with property division.
Although you may not end up with an equal 50/50 distribution, the goal is for the court to divide marital property in a fair way based on the total circumstances of your marriage and divorce. With an attorney guiding you, the process will go much smoother.
If you need help with property division in your Minnesota divorce, the skilled divorce lawyers at Martine Law can advise you. Contact us online to schedule a consultation. Our attorneys serve clients in Minneapolis, St. Paul, and across the Twin Cities metro.