Tag Archives: Burden of proof to substantiate Nonmarital Property

Family Law – Interpreting Antenuptial Agreements in Minnesota

The Minnesota Court of Appeals recently addressed antenuptial agreements in Peterson v. Deeb, A13-2259 (Apr. 27, 2015).  As opposed to the more well-known “prenuptial agreement,” antenuptial agreements are made between partners after they are already married. The details agreed to in the contract are typically the same as those in prenuptial agreements, including property division, support, and similar matter.

 

Minnesota courts have long recognized antenuptial agreements, which change the statutory provisions for dividing both marital and nonmarital property when marriages are dissolved. Minnesota Statute Section 519.11 codifies the state law on antenuptial agreements.  Agreements are enforceable if the parties provide each other with a full and fair disclosure of their assets and income and the parties have the opportunity to consult with independent legal counsel of their own choice.  When these two requirements are met, the party who challenges the agreement has the burden of proof to show that the agreement was invalid.

 

New MN Family Law Case

 

In this case, the wife had been the sole owner of the parties’ home before the marriage; her equity was $75,000.  There was no dispute that the parties disclosed all of their assets and were represented separately by independent counsel throughout the negotiations and drafting of the agreement.  Under the terms of the agreement, the wife retained her $75,000 nonmarital interest in the home, but the parties agreed that any future increase in value would be considered marital property.  Thus, within 30 days after the marriage ended, the homestead was to be transferred into joint tenancy, with both parties as obligors of the mortgage.

 

After the antenuptial agreement was signed, the parties refinanced the homestead and used that money to purchase a cabin.  The district court found that the parties’ equity in the homestead, including both marital and nonmarital assets, had been eliminated by both the refinancing and by a decline in market value.  Thus, the district court found that selling the parties’ cabin and other real property would enable them to pay each for their nonmarital contributions to the purchase of these assets.  However, the district court awarded the wife $75,000, her interest in the homestead protected in the antenuptial agreement, and the husband was awarded $15,417 for his nonmarital contribution.

 

Points of Contention

 

In this case, the issue was the interpretation of the agreement, not the validity of the antenuptial agreement itself. The district court rejected the husband’s argument that the wife’s nonmarital interest of $75,000 was eliminated when the parties refinanced the homestead and its value decreased.  The Court of Appeal upheld the district court ruling.

 

In reviewing that lower court decision, the Court of Appeals noted that the purpose of contract interpretation is “to give effect to the parties’ intent,” and that a court should “avoid any interpretation that would make a contractual provision meaningless.” The Court of Appeals found that the “overriding purpose and intent of the parties” was to protect each party’s nonmarital party in the event the marriage was dissolved, including both the wife’s $75,000 in equity and the husband’s separate bank account.  The agreement itself did not indicate that purchasing other assets with non marital funds or commingling marital and nonmarital property would result in the marital property being eliminated.

 

The district court held (and the Appeals Court agreed) that the husband’s interpretation, which would eliminate the wife’s nonmarital asset, was “unconscionable” and unfair.   The Appeals Court also found that the district court’s enforcement of the agreement was fair and equitable.  When the parties married, their only real estate asset was the wife’s $75,000 in equity.  When they divorced, more than twelve years later, their equity had increased to $235,000, so the wife’s nonmarital asset ($75,000) was now only 31.9% of the parties’ total equity.  After the awards to each party of their nonmarital assets, 61.5% of the equity remained to be distributed as marital property.   Thus, the parties had obtained a significant increase in their joint assets during the course of the marriage.

 

Get Legal Help
This case illustrates the importance of obtaining legal counsel whenever an antenuptial agreement is considered.  For questions about these or any other Minnesota family law issues, be sure to seek out the aid of an experienced family law attorney for tailored guidance.

Non-Marital Property Becomes Marital Property when Commingled with Marital Property

Be Careful: Non-Marital Property Becomes Marital Property when Commingled with Marital Property

In Wallace v. Wallace, A13-2167 (Oct. 6, 2014), the Minnesota Court of Appeals held that non-marital property in bank accounts became marital property when the funds were commingled with marital property acquired during the marriage.

In this case, the wife asked that funds in a checking account and a savings account be awarded to her as non-marital property. Both accounts had belonged to her before the marriage. However, after she was married, she deposited her wages in the checking account and used the funds in that checking account to pay the couple’s monthly bills. She also made use of the funds in her savings account, by moving funds from the savings account to the checking account when needed to pay bills; she would then repay the savings account with her wages earned during the marriage.

The district court accepted the wife’s argument and awarded her $1,182.27 of the funds in the checking account and $20,076.91 of the funds in the savings account. The husband appealed.

The Minnesota Court of Appeals reversed the district court. The court noted that there is a rebuttable presumption that any property acquired by a married person during the marriage is marital property as well as a presumption that property acquired before the marriage is non-marital property. Minn. Stat. Section 518.003, subd. 3b. When a marriage is dissolved, the non-marital party goes to the party to whom it belongs while the marital party is divided equitably between the parties. Minn. Stat. Section 518.58, subd. 1.

Here, there was no dispute that the spouses commingled the marital property (the wife’s income during the marriage) with the non-marital property that she held before the marriage.   The wife argued that, looking at the balances of the accounts at the start of the marriage, the deposits, withdrawals, and balances at the end of the marriage, the non-marital property could be determined. The court rejected her argument, finding that the only way to maintain the non-marital character of the funds is either to maintain it in a separate account distinct from marital assets or to trace the funds by showing particular items of tangible property that were bought with non-marital funds.

 

How the Court Decided

The court relied on precedents that have held that commingling marital and non-marital funds converts all money in the account into marital property when the account is used for ordinary living expenses and the non-marital funds are not traced to a particular asset.

In order for non-marital assets to remain non-marital assets and belong solely to one spouse, the funds must either be segregated and not used for any marital expenses or must be used to purchase a tangible asset, enabling them to be traced to that asset. Thus, if non-marital assets are used to purchase (in full) a specific item, such as a valuable painting, that painting becomes a non-marital asset. But if the non-marital asset is used for living expenses, then it becomes a marital asset, in the absence of a premarital agreement.

Thus, the court held that all the funds in the accounts were marital property and, therefore, needed to be divided equitably.

In this case, the wife did not file a responsive brief to the Minnesota Court of Appeals. As this case illustrates, even if a party has won at the district court, if the case has been appealed, the party should file a brief in the appellate court. If you have any questions about preserving the non-marital character of your property, you should consult a family law attorney.