Financial Issues In Divorce

Some of the most common financial issues that couples face in divorce include:

Property Division

During divorce, a couple must divide their marital property between themselves.

In North Dakota, marital property generally includes all property that spouses own, regardless of how or when it was obtained, including items either spouse had before the marriage.

In Minnesota, marital property generally includes all property that spouses acquired during marriage, regardless of who paid to purchase the asset or the titling of the asset. Conversely, spouses can often keep their separate property in divorce. Separate property generally includes all assets a spouse acquired before marriage and certain assets acquired during marriage, such as inheritances or gifts exclusively given to one spouse.

Both states follow the equitable distribution system for property division in divorce. Under the equitable distribution system, a court asked to divide marital property must split the marital estate fairly. However, a fair division does not always mean an even division, and spouses typically do not agree on what “fair” means. Instead, courts must consider various factors, such as the length of the marriage and each spouse’s contribution to acquiring marital property (including contributions as a homemaker), to determine what a fair division of marital assets looks like.

Property division during divorce can trigger various financial issues and disputes, including:

• Determining how to classify and divide commingled assets (separate property combined with marital property, such as an inheritance used to fund the purchase of the family residence)
• Classifying appreciation of separate property as marital property (e.g., the contributions to and increase in value of retirement accounts during marriage)
• Appraising high-value or complex assets, such as business ownership interests, commercial real estate holdings, or artwork/collectibles
• Structuring the division of complex assets that have transfer restrictions, such as business interests or tax-advantaged retirement accounts

Spousal Support/Alimony

In some divorces, a spouse may request alimony/spousal support. Courts may award alimony in cases where spouses have a significant earning disparity, usually due to one spouse foregoing educational or professional opportunities to support their spouse’s business or career advancement as a homemaker, when alimony can help that spouse maintain a comparable standard of living as they pursue education and training to increase their earning capacity. Courts may award various types of spousal support/spousal maintenance, including:

• Temporary Support – Provides a spouse with financial assistance during the divorce proceedings pending resolution of the couple’s economic issues in divorce.
• Transitional or Rehabilitative Support – Ensures that a spouse can maintain a standard of living while they pursue education, training, or work experience to increase their earning capacity and become self-sufficient.
• Long-Term or Indefinite Support – Awarded in rare cases where the court finds a spouse incapable of becoming self-supporting, usually due to advanced age, prolonged absence from the job market, or physical/mental disabilities or illnesses.

Courts consider various factors when determining whether to award spousal support and the type of support to award, including:

• The length of the marriage
• The degree of the parties’ earning disparity
• Each spouse’s respective earning capacity
• Each spouse’s age and health
• The standard of living enjoyed during the marriage
• Whether a spouse deferred their educational and professional advancement to support their spouse’s advancement

Spousal support may end when the recipient remarries or cohabits with another individual in a relationship akin to marriage for longer than one year. However, courts can decline to terminate rehabilitative support due to remarriage/cohabitation.

Division of Debt

Courts may also order couples to divide some types of debt in divorce. Disputes between spouses frequently arise over dividing responsibility for debts such as joint credit cards, mortgages, and personal loans taken out to finance family expenses.

Assignment of debts in divorce can also lead to legal issues when a court orders one spouse to assume sole responsibility for a debt, but both spouses remain contractually obligated to the lender. When the spouse assigned the debt fails to pay, the other spouse can suffer significant adverse financial consequences. A skilled attorney can help you assess your options if that occurs. 

Retirement Accounts and Pensions

Dividing spouses’ retirement or pension accounts can raise complex legal issues. Growth in the value of retirement and pension accounts during marriage typically qualifies as marital property subject to division. However, calculating the portion of a spouse’s retirement/pension account that constitutes marital property vs. non-marital property may require expert financial analysis in a Minnesota divorce matter.

Furthermore, dividing retirement/pension accounts in divorce involves more than simply withdrawing the other spouse’s portion of the account. Early withdrawals from tax-advantaged retirement accounts can trigger significant penalties. Instead, courts usually issue qualified domestic relations orders, instructing a financial institution or retirement/pension plan manager to distribute a portion of the account to the account holder’s ex-spouse when distributions begin.