How to Divide Property During a Divorce: Asset and Debt Division in Minnesota

Highlights

• Property division during divorce generally involves three steps: information gathering, negotiations or mediation, and finalization.

• Information-gathering involves initially listing all of the assets and debts you are aware of, then delivering this document to the spouse to come to an agreement that all property has been accounted for. Importantly, the goal is to identify all assets, including those your spouse might be trying to obfuscate.

• Negotiations can be friendly, involve a third-party mediator, or be completed in court at a divorce trial.

• A divorce decree ends the process and outlines how property and debts will be split between the two parties. A divorce decree always comes from a family law court in Minnesota, though it can be agreed to in advance.

How To Divide Property During a Divorce in 3 Steps

Property division during a divorce can be a fraught process. Questions like “who gets the house?”, “will I have enough to live on?”, and “is my future at stake?” are common early in the divorce process. What makes up community property, which includes all assets and debts acquired during the marriage that are subject to division, plays a significant role in these considerations.

A qualified family law attorney in Minnesota can help you feel confident in the outcomes, but so too can simply understanding what to expect.

In this guide, we’ll take a look at what to expect as you and your spouse set out to divide marital property, including community property, plus marital debts such as mortgages, loans, and credit card debts incurred during the marriage, as well as pitfalls to be aware of.

Step 1: Inform and Create a Marital Property Balance Sheet

One of the most important elements in dividing property is to first understand what fits in that description – the concept of marital property. This process can begin on your own or with the help of your family law attorney, but the goal is to create a comprehensive list of property and assets:

• acquired during the marriage, considered joint or marital property and subject to division

• acquired prior to the marriage, possibly considered separate property and NOT included in division

• acquired during or prior to the marriage, but that MAY be subject to divison

We’ve covered the above elsewhere (read more), but these assets generally include just about anything you might own or be liable for:

• real and personal property, including homes, vehicles, and basic belongings

• financial assets, including bank accounts, retirement accounts, etc.

• business ownership, including private and public equity

• liabilities and debts, both personal or business

Once your assumptions and ideas about marital property and debts are assembled in one place – called a marital balance sheet – the next step is to exchange financial information so that both spouses and their respective attorneys have the same information and are aware of the source of information.

Whatever your case entails, this first “informational” step must include obtaining and providing complete financial information. Chances of a speedy resolution through an out-of-court settlement, whether through direct negotiation or mediation, will increase exponentially if both spouses and their attorneys objectively and subjectively believe that they have all of the requisite information.

Common Problems in Dividing Assets and Preparing for Equitable Property Division

One of the biggest impediments to resolving a divorce case, specifically property division, is the lack of information or disagreements over separate and marital property. This can occur for various reasons. 

Let’s examine some examples of what this may look like.

Incomplete Information or Not Trusting the Information

A spouse either does not have the information that the other spouse is suggesting exists, or they do not trust the information that is being provided by their spouse.

By way of example, if a spouse has a business that has historically only been operated by one spouse, the other spouse very well may not know the value of that business for divorce reasons. Special attention must be paid to provide information, and the source of information, so that trust can be built and the process can move from information exchange to actual negotiation.

Yet another example could be that one spouse wants to remain in the marital homestead and wants to rely on his/her version of fair market value. The other spouse may not feel comfortable with this self-serving valuation, even if it might be accurate. Obtaining an appraisal is the fastest way to quell concerns.

Too often, spouses want to actively negotiate property division without understanding that the other spouse may not be comfortable with the information that exists. 

Hidden Assets from the Marital Estate

A spouse may have concerns that their partner is concealing or hiding information in the context of the divorce proceeding. On some occasions, this concern may very well be appropriate.

A spouse may have not disclosed the true extent of the financial assets during the marriage, which would lead to distrust during the divorce proceeding. Whatever the reason, this puts the spouse who is not aware of the entire financial picture at a significant disadvantage.

In this context, it may be necessary to engage in formal discovery. As the name suggests, during discovery, the attorney representing one spouse asks a series of questions (known as interrogatories) and request documents (Request for Production of Documents).

These documents are served upon the other party (through their attorney, if represented). The spouse who is served with formal discovery has thirty (30) days to respond. If the answers are incomplete, evasive, or if information is simply not provided, court intervention can be sought and a motion to compel discovery can be filed with court. When faced with such a motion, the court can compel a party to provide complete information and to provide corresponding documents. In addition, the court can also assess attorney’s fees against a party who does not provide complete discovery or delays providing information for dividing your property.

Formal discovery also extends to the ability to take depositions.

An attorney can conduct a deposition of a spouse where the spouse must answer questions under oath, and both the questions and answers are transcribed by a court reporter. After the deposition, a transcript is generated by a court reporter, which captures verbatim what was asked and what was answered. When concern exists that a spouse may be hiding information, a deposition can be a helpful tool.

Formal discovery also incorporates the ability of the attorney to subpoena records from third parties, such as medical records from a hospital or account statements from banks or other financial institutions.

If formal discovery is not sufficient, the use of third-party experts can also be helpful. For example, a forensic accountant can be retained and utilized in the context of discovering financial information.

Transfer of Assets

A spouse may have concerns that their partner may have transferred marital funds to a third party for the specific purpose of keeping assets out of the divorce division process.

In such an instance, the court has the power to place the harmed spouse in the same situation they would have been had the transfer not taken place. For information gathering purposes, this means that formal discovery must be served with the goal and specific purpose of determining when the transfers occurred and the connection between the transfers and the various financial institutions where the transfers took place.

Although it is often used as a cliché, “follow the money” is an appropriate way of following up on these concerns.

Step 2: Propose, Mediate, Negotiate, or Go to Trial

After information has been exchanged, the next step is to engage in a process intended to maximize the chances of reaching settlement.

This could mean a four-way settlement conference, where you and your attorney meet with the other spouse and their attorney to attempt an initial agreement.

It could mean exchanging written offers of settlement via attorneys.

Most cases involve the use of mediation where both sides and their respective attorneys meet with a neutral (mediator) to try to reach an agreement.

In community property states, the division process may vary, as laws dictate the joint ownership and division of assets and debts, with some states allowing for equitable distribution based on certain circumstances. Often, attorneys will select the process before exchanging information so that delays can be prevented, as this process can take a couple of months to schedule with experienced divorce Mediators.

Look to your attorney to select an appropriate mediator/neutral for your case. Selecting the right professional for your case, based on the specific issues that are involved, is one of the most underrated aspects of a divorce case.

If the plan is to participate in Mediation, there should be an internal meeting between you and your attorney to go over all of the issues that need to be addressed at mediation. Your attorney should lead this meeting and should have a comprehensive marital balance sheet along with an understanding of all of the peripheral and related issues. If a financial expert was retained, their report should be ready to share at Mediation.

All questions relating to the division of assets, identification of separate property, allocation of debt, which spouse will get what assets, division of retirement accounts, should be all addressed with your attorney before mediation. You should have a clear idea of what assets and liabilities exist in your case, what is your desired outcome, where the differences may be between your position and your spouse’s position, and the strategy for closing the gap between the positions.

At mediation, your attorney should lead the conversation and actively negotiate on your behalf – of course, with you listening intently and participating when required. Your attorney should have the requisite legal knowledge to not only explain your property division proposal to the mediator, but to know your desires.

Before composing an offer of settlement or responding to an offer, you should meet with your attorney to discuss all aspects of the proposal, including the division of assets like retirement accounts and the identification of separate property. Retirement accounts are significant assets that may require legal review to ensure a smooth division process and to avoid costly mistakes. Understanding the distinction between marital and separate property, such as a spouse’s separate property, is crucial. Separate property is treated differently from marital property during the division process, and using marital funds to improve the separate property of one spouse may entitle the other spouse to a portion of the increase in property value.

If Mediation or other forms of negotiation are not successful, another mediation session will be considered. If mediation seems unrealistic, your case may be better suited to go to Trial, where a judge can decide on the disputed issues.

Step 3: Finalize With a Divorce Decree

Regardless of whether your case settles out of court via settlement or at trial, your final divorce decree will award specific assets to you as well as your ex-spouse. Similarly, the divorce decree will identify the allocation of debt.

One of the practical realities of a divorce decree is that the property division severs the financial ties between the two spouses for all existing assets and liabilities. In other words, the divorce decree awards specific assets to husband and specific assets to wife.

Often, there is additional work that must be done after the divorce decree is finalized and that is also done by the divorce attorney; transferring real estate awarded to you in the divorce proceeding, for example, or transferring retirement funds from your ex-spouse to an IRA in your name, and more.

What’s a QDRO?

It’s important to understand the role of a Qualified Domestic Relations Order (QDRO) in dividing retirement benefits, as these are often significant assets that require careful handling and legal documentation during the divorce process.

Finalizing Your Divorce and a Fair Property Settlement Agreement

Remember, Minnesota law seeks a just and equitable division of assets, NOT necessarily equal divison.

If you have questions or concerns about property during a divorce, or you’re considering divorce in Minnesota, our team is here to help. Call or email us today to schedule a free initial consultation and learn how Alithis Family Law has helped smooth the divorce process and provide greater peace of mind for people just like you.