Selling Assets During a Minnesota Divorce
Division of marital property is one of the most infamously difficult parts of a divorce, at least if you go by what you see on television. Spouses will fight tooth and nail over who gets to keep this sofa, or that lamp, or this commemorative Beatles dinner plate. Some states allow courts to consider fault-based factors when dividing up marital property. One might argue that this creates an incentive for nasty fights over property. Minnesota’s family laws try to make it easier on everybody by excluding fault as a basis for property decisions. Instead, state law presumes that both spouses contributed to the creation and maintenance of the marital estate, although it does not assume they contributed equally. State law also places obligations on the spouses with regard to marital property.
Under Minnesota law, neither spouse may sell or otherwise transfer marital property in anticipation of or during the divorce without the other spouse’s permission. If a court finds that one spouse concealed or disposed of property in this manner, it can adjust the property division to compensate the other spouse.
Property Division in a Minnesota Divorce
Section 518.58(1) of the Minnesota Statutes provides that courts “shall make a just and equitable division of the marital property” in divorce cases. Legislators choose their words carefully, because they know that lawyers will pick over every word in a statute to look for every possible meaning that might help a client. Several words in the quoted text are likely to be familiar to any lawyer. The word “shall,” for example, suggests that courts do not have much discretion over whatever comes next. “Just and equitable” essentially mean “fair.” The word “equitable” does not — and let me be clear about this — mean “equal.”
As soon as the statute establishes a court’s obligation to divide marital property fairly, it adds the caveat that the court must do this “without regard to marital misconduct.” Awarding property to one spouse or another, in other words, cannot be a punishment against either spouse for wrongdoing in the marriage. So what, then, should a court consider when deciding what is “fair”? Section 518.58(1) has some suggestions, including:
- How long the parties were married, and whether either of them were married before;
- Age and health status of both parties;
- Income, occupation, job skills, and other factors suggesting how each spouse is likely to fare without the other’s support; and
- Each spouse’s contributions towards “the acquisition, preservation, depreciation or appreciation” of marital assets.
As mentioned earlier, state law directs courts to presume that “each spouse made a substantial contribution” to the value of the marital property. The question is then whether any factors exist that would weigh in favor of an unequal division of property. The next part of § 518.58 offers one possible factor.
Fiduciary Duties of Spouses Prior to and During a Divorce
According to § 518.58(1a), each spouse owes a fiduciary duty to the other spouse to maintain and preserve marital property during preparation for a divorce, and while the divorce is pending. This means they have a duty to act in a way that will benefit their spouse, even if they might have a better opportunity for themselves. It is the same kind of duty that attorneys owe to their clients and that corporate directors and officers owe to their corporations. Courts take breaches of a fiduciary duty very seriously.
Concealment or Disposal of Assets
The parties to a divorce may not dispose of marital property, such as by selling an asset or emptying a bank account, unless the other spouse consents, or it is “in the usual course of business or for the necessities of life.” The spouse who alleges unauthorized disposal or dissipation by the other spouse has the burden of providing proof in court.
If a court determines that one spouse disposed of marital property without the other spouse’s permission, either at a time when they anticipated a divorce happening soon, or once the case was filed, the court can compensate the other spouse. Courts usually achieve this by adjusting the division of the remaining marital property, but state law gives them some other options as well.
Decisions from the Minnesota Court of Appeals from the past couple of years illustrate various aspects of how courts handle claims of concealed or mishandled marital property:
- In Sodhi v. Sodhi, the husband claimed that the wife should be liable for dissipation of $177,000, the amount she withdrew from a joint financial account and then spent. The court found she could justify half that amount as necessary living expenses, and held her liable for dissipation of the remainder.
- Vogt v. Vogt presented a similar situation, in which the wife withdrew over $20,000. The court found, however, that she could justify all of the expenditures as necessary “for living expenses and to pay marital debt.”
- In Prabhakaran v. Kannan, the wife had sold two properties owned by the parties in India shortly after the husband filed for divorce. No one seemed to dispute that this violated her fiduciary duty. One question for the court was whether she should be liable for “conduct-based attorney’s fees” under § 518.14(1), which a court may order against “a party who unreasonably contributes to the length or expense of the proceeding.” The court approved this request.
- In Tiedke v. Tiedke, the wife challenged the husband’s sale of two automobiles without her permission. He claimed that he did so “in the usual course of business.” The court noted, however, that the husband mentioned a job at a car dealership in his financial disclosure documents, “but he did not mention a business that trades automobiles.” The court ruled, in effect, that he could not claim the usual-course-of-business exception if he did not tell the court that he had that kind of business.
Family law attorney Anthony Toepfer practices in St. Cloud, Minnesota. He represents people during profoundly difficult times in their lives. He advocates for his clients both in and out of the courtroom in cases involving divorce, disputes over property division, and other family law matters. As a client at Toepfer at Law, you will always have access to the most up-to-date information about your case, and we are always available if you have questions or concerns. Please contact us through our website, or give us a call at (320) 497-4416 today to schedule a confidential consultation to discuss your case.