Ending a marriage is hardly ever straightforward, especially when it comes to dividing assets and debts. But is it possible to get divorced in Minnesota without splitting marital property? While it may seem out of reach for many couples, there are situations where spouses can avoid partitioning assets during divorce proceedings.
In this blog post, we’ll explore the nuances of asset division in Minnesota, examine the idea of status-only divorce, and discuss alternative approaches like legal separation that could allow you to divorce without dividing your property.
What is Marital Property in Minnesota?
Minnesota is considered an “equitable distribution” state when it comes to dividing property in a divorce. This means marital assets are divided in a way the court considers fair but not necessarily an exactly equal 50/50 split.
By default, almost all property acquired during a marriage is considered “marital property” in Minnesota and is subject to division if a couple gets divorced.
This includes:
- Houses or other real estate
- Bank accounts and investments
- Retirement accounts like 401(k)s
- Businesses
- Cars and other vehicles
- Valuable personal property like jewelry
- Debt accrued during the marriage
Assets owned before the marriage and gifts or inheritances received during the marriage are generally considered “non-marital” and belong solely to the spouse who acquired them.
Separate vs. Marital Property
Separate property refers to any assets or debts that belong to one spouse alone. This includes:
- Property acquired before marriage
- Inheritances and gifts received during marriage
- Compensation for personal injury
- Property excluded in a prenup
Marital property encompasses assets and debts accumulated during the marriage. These are subject to division and include:
- Income earned from employment
- Retirement accounts like 401(k)s
- Investments
- Real estate
- Cars and other vehicles
- Credit card debt
- Mortgages
Identifying whether an asset or liability is separate or marital is key, as separate property is typically awarded to the owning spouse during divorce.
Community Property vs. Equitable Distribution
Minnesota follows an equitable distribution system when handling property division in divorce. This means that marital assets are divided in a fair way based on factors like:
- Length of the marriage
- Age and health of spouses
- Earning potential and income
- Contributions to acquiring marital property
The court does not necessarily split marital property 50/50. The aim is an equitable, though not always equal, distribution.
In community property states like California, marital assets are divided equally according to community property laws. There are only 9 community property states, and Minnesota is not one of them.
How is Debt Handled in Divorce?
Along with physical property, Minnesota divorcing couples must also determine how to divide marital debt. This includes:
- Mortgages
- Car loans
- Credit cards
- Personal loans
- Medical debt
- Any other debts acquired during the marriage
The same rules that apply to property division also apply to splitting debt. Spouses can either agree on how to divide debts, or the court will order a fair allocation based on factors like income and who benefited most from the spending. Consult with a tax advisor regarding any potential tax consequences associated with transferring property or dividing debt in your divorce settlement.
Alternative Options for Avoiding Asset Division
If you wish to divorce without partitioning property in Minnesota, there may be some alternatives to status-only divorce to consider:
1. Legal Separation
Legal separation is similar to divorce in that you petition the court to formalize your separation. However, you remain legally married, so asset division is not addressed.
Some reasons couples pursue legal separation include:
- Preserving health insurance or other benefits of marriage
- Due to religious beliefs about divorce
- To test separation before fully divorcing
One major caveat is that your assets and debts remain joint during legal separation. This ongoing financial entanglement and lack of closure for some make legal separation an imperfect solution.
2. Marital Separation Agreement
Spouses can opt to create a marital separation agreement that lays out the terms of separating while remaining married.
This agreement addresses issues like:
- Child custody arrangements
- Spousal support payments
- Who stays in the family home
- How debts and assets will be managed
A separation agreement can provide a middle ground during a contentious divorce.
3. Postnuptial Agreement
A postnuptial or post-marriage agreement outlines what happens if you and your spouse eventually divorce in the future. Signing a postnup after marriage can protect your assets and eliminate fighting over property division down the road.
Key points to address in a postnuptial agreement include:
- How assets like investments and retirement funds will be divided
- Who will retain ownership of your home or other real estate
- Spousal support parameters
- How bank accounts will be distributed
Postnups require both spouses to consent and typically involve attorneys to ensure enforceability. Overall, a postnuptial agreement could be an advantageous stepping stone to simplifying future asset division if you later decide to divorce.
4. Divorce Mediation
Divorce mediation provides an alternative way to hash out divorce details like property division outside of court. A neutral mediator facilitates discussions and helps you and your spouse aim for compromises.
Mediation benefits include:
- Allows you to negotiate creatively without court intervention
- More privacy than a courtroom
- Typically, faster and less expensive
Mediating your divorce can empower you and your spouse to create win-win solutions regarding assets, debts, spousal support, and child-related matters.
Risks of Avoiding Splitting Your Assets in Divorce
While dividing property during divorce can be stressful, attempting to avoid asset division altogether also poses notable risks.
It’s essential to consider the downsides:
- Potential Hidden Assets and Debts: Opting for status-only divorce or another alternative means you likely won’t have the court thoroughly identifying and valuing all marital property. This lack of disclosure opens the door for a spouse to conceal assets or debts.
- Loss of Equitable Property Rights: Even if you want to keep the divorce amicable, you have legal rights to an equitable share of marital property in Minnesota. Surrendering your fair property rights could leave you financially disadvantaged.
- No Spousal Support: Since status-only divorce does not cover spousal support, the lower-earning spouse could really struggle financially. Make sure you understand the long-term implications of giving up spousal maintenance.
- Tax and Debt Implications: From tax liabilities on real estate transfers to shared credit card debt, divorcing without addressing money matters carries risks. Consult experts to ensure you fully grasp the potential consequences.
- Loss of Leverage: When marital property division is off the table, you lose bargaining power and leverage in the divorce process. This could negatively impact your ability to negotiate on issues involving children or spousal support.
Can Spouses Agree to an Unequal Division?
Instead of leaving it up to the court, spouses can create their own marital property agreement as part of the divorce stipulation. This allows them to divide assets unequally if they mutually agree to the terms.
For example, one spouse may agree to receive a larger share of the house in exchange for the other getting a greater share of retirement funds. Or, spouses who run a business together might agree one will keep the business while the other gets a greater share of other assets.
As long as the agreement meets requirements for being legal and binding, courts will usually uphold voluntarily agreed upon property divisions.
Professional Guidance is Essential for Divorcing Without Asset Division
Dividing property and debts equitably while also meeting the needs of both spouses can seem nearly impossible without the right legal guidance. At Martine Law, our seasoned Minnesota divorce lawyers have successfully helped many couples navigate this challenging process.
We take pride in our compassionate yet aggressive approach to protecting our client’s rights and advocating for a property settlement that supports their best interests. Contact us for a free case review and to discuss the options for your situation.
