No Fault Divorce and Division of Marital Property and Debt

No Fault Divorce and Division of Marital Property and Debt

In years past, courts would only grant a divorce if there was evidence of fault in the marriage.  Over many years divorce became easier to obtain.  Now, no-fault divorce exists in all states, which means that in almost all cases the courts will grant a divorce.   In Minnesota, the  district court grants a “dissolution of marriage” when “the court finds that there has been an irretrievable breakdown of the marriage relationship” (Minnesota Statutes, 518.06 Subd 1.). This irretrievable breakdown of the marriage relationship is usually simple to prove.  In fact, in recent years, it has become almost impossible to disprove.

Besides ending the marriage, a divorce divides property and debt, and makes provision for children.  When dividing property, the first question is, which property?  Normally, only marital property is divided.  There is a fairly long discussion of marital and non-marital property in Minnesota Statutes, 518.003 Subd 3b.  In summary, all property owned by either party is marital property unless proved to be non-marital.  Non-marital property is usually property acquired before the marriage or after the cut-off date in the divorce (“valuation date”), acquired at any time as a gift or inheritance, or excluded by a valid antenuptial agreement.  There are a significant number of arguments about whether property is marital property or non-marital property because the difference can amount to a lot of money, and proof can be difficult.  This is an area where a lawyer is especially important.

The division of  marital property and debts can be complicated and difficult to go through. Previously, the court would consider the marital misconduct of each party when dividing marital property. This led to complications and difficulties with each party bringing up numerous fault claims against the other party. The courts no longer take into account marital misconduct when dividing assets: “the court shall make a just and equitable division of the marital property of the parties without regard to marital misconduct (Minnesota Statutes, 518.58 Subd 1).

Notice that the statute says “just and equitable” not “equal”.  As a matter of fact, something very close to equal is usually used to divide property and debts because it is easier – it makes a tough decision about what is “just and equitable” into an arithmetic problem.  Some aspects of a marriage the courts can take into account when dividing assets include  “the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, opportunity for future acquisition of capital assets, and income of each party” (Minnesota Statutes, 518.58 Subd 1.).

Another important aspect the courts can consider in the division of assets is the “Transfer, encumbrance, concealment, or disposition of marital assets” (Minnesota Statutes, 518.58 Subd. 1a.).  A party must prove that the other party spent or concealed money without their knowledge in anticipation of the marriage dissolution or during the dissolution. To compensate the injured party, the court may place “both parties in the same position that they would have been in had the transfer, encumbrance, concealment, or disposal not occurred” (Minnesota Statutes, 518.58 Subd. 1a).

Division of debt in a divorce tends to be less rigid than division of property.  A rule of thumb is that a party that gets a piece of property also gets the associated debt.  For example, if the wife gets the car, she also pays the car loan.  Another rule of thumb is that the student pays his or her own student loan.  But remember, a “rule of thumb” is a normal expectation, not a firm rule, and it is not uncommon for a court to do something creative with debt in a divorce.

            Generally, spouses are not liable to creditors for the debts of the other spouse.  Both spouses are protected by their “Separate legal existence” (Minnesota Statutes, 519.01), and “Property rights” (Minnesota Statutes, 519.02.).  Therefore, both spouses have their own legal identity and own their property and are responsible for their debts as if they were unmarried.  However, there are a few cases where the husband and wife are both liable to a creditor. These include “necessary medical services that have been furnished to either spouse including any claims arising under section 246.53, 256B.15, 256D.16, or 261.04, and necessary household articles and supplies furnished to and used by the family” (Minnesota Statutes, 519.05). With a divorce the responsibility for the joint debt is often divided between the two spouses, which can lead to more assets for the one who takes on the majority of the joint debt. However, if the spouse responsible under the divorce decree for the joint debt fails to pay it, then the creditor has the right to take the money from the other spouse even after the divorce.  This is because the creditor is not a party to the divorce, so the creditor’s rights are not affected.  Divorce decrees often mitigate this problem by providing for indemnification of a spouse damaged by the failure of the other spouse to fulfill obligations created in the decree

 

Updates to Minnesota Statutory Short Form Powers of Attorney (Published on April 2, 2014 by Rahul A. Narayanan)

In powers of attorney the PRINCIPAL (the person who executes the document) grants their ATTORNEY(S)-IN-FACT (the person(s) given the power) the legal right to execute financial transactions on behalf of the principal. “Attorney-in-fact” is a term of art. The attorney-in-fact is not necessarily an attorney-at-law and does NOT have to be a lawyer.

There are many different types of powers of attorney designed to serve various purposes. Some of the most useful powers are “statutory powers of attorney”. they are flexible and the scope of the powers they grant is reasonably well understood. Also, their legal status, execution and use are specifically prescribed by state law. Of course, this also means the powers and scope of statutory powers of attorney vary from state to state.

In Minnesota, the power may be limited to financial transactions specifically selected on the document. A broad range of powers can be granted: banking or investments, property transfers, insurance, gifts, claims and litigation, real estate, obtaining records or information and beyond. Thus,  statutory powers of attorney can serve many purposes. The power can also have an expiration date, should the principal choose.

The Minnesota Legislature made many changes required for powers of attorney executed after January 1, 2014. The law does NOT invalidate powers of attorney executed before this date under the old requirements. See Minnesota Statutes, §523.23, subd. 6.

First, §523.20 was amended to require that the powers-of—attorney contain “an acknowledgement that the attorney-in-fact has read and understood the notice to the attorney-in-fact required under section 523.23…”. Second, §523.24 makes changes which pertain to the federal annual gift exclusion amount. Third, under §523.14, subd. 14, “The language conferring general authority does not include any powers to make health care decisions for the principal.”

The actual substantive changes to the statutory powers of attorney include a major change in the third section, which states, that, “my attorney(s)-in-fact MAY NOT make gifts to the attorney(s)-in-fact, or anyone the attorney-in-fact is legally obligated to support, UNLESS I have made a check or an “x” on the line in front of the second statement below and I have written in the name(s) of the attorney(s)-in-fact. The second option allows you to limit the gifting power to only the attorney(s)-in-fact you name in the statement. Minnesota Statutes, §523.24, subdivision 8, clause (2), limits the annual gift(s) made to my attorney(s)-in-fact, or to anyone the attorney(s)-in-fact are legally obligated to support, to an amount, in the aggregate, that does not exceed the federal annual gift tax exclusion amount in the year of the gift…”

There are now two additional sections at the end of the document following the signature page that serve as notices to the principal and attorney-in-fact. These sections advise both principal and the attorney(s)-in-fact of their rights under the law, the powers granted, and their obligations under these powers. The principal is required to sign this notice and the attorney(s)-in-fact to initial it. This is to ensure that both Principal and Attorney-in-Fact are informed of their duties.

The changes to the powers of attorney were tailored to inform everyone of his or her rights and responsibilities. The new powers of attorney are more precise about what powers are granted or not granted.

This information and discussion about the changes to the powers of attorney does not constitute or serve as legal advice. If you have any questions about this document, or would like to discuss preparing a statutory power of attorney, please contact an attorney.

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