Under Minnesota law, the statutory basis for dissolving a marriage is one spouse’s (or both spouses’) assertion that there has been an irretrievable breakdown of the marriage.  It is important to note that it is not required that both spouses assert that the marriage cannot be saved.

In many cases, one spouse wants to end the marriage, but the other spouse would like to save the marriage.  In one sense, the Minnesota statute reflects a certain reality: if both spouses are not firmly invested in the preservation of the marriage, the marriage cannot survive.  In other words, the marriage cannot be sustained if either spouse has one foot in, and one foot out of, the marriage.  If one spouse makes the assertion of irretrievable breakdown, the other spouse can refrain from admitting it, but cannot keep the divorce from happening.

What the statute actually reflects is the no-fault grounds for divorce that accompanied the abolition years ago of fault-based grounds for divorce, such as adultery, abandonment or cruelty.

It is important to consider some distinctions in retirement interests and the way they are divided in a divorce.  A Qualified Domestic Relations Order (QDRO) is commonly needed so that both spouses can have separate interests in a retirement account without problems associated with tax penalties and early withdrawals.

The QDRO process involves the two spouses, their attorneys, the court and the plan administrator. Sometimes, an additional person is involved, if the attorneys outsource the drafting of the QDRO to a third party.  Each party and their attorney must approve a QDRO draft, the court must sign it, and the plan administrator must pre-approve (early in the process) and implement (late in the process) the QDRO.

Oftentimes, the asset that is divided by the QDRO is a 401(k) account or pension that neither party plans to tap into for many years.  In that case, the time involved in processing a QDRO is of minimal concern. However, when one or both parties needs to liquidate some retirement funds to pay debts or purchase a house, it is a problem that the process takes so long.  The benefit of the long process, though, is the ability for the spouse receiving a share of the other spouse’s account to cash out their share without tax penalty.

When the parties are dividing an IRA (individual retirement account), a QDRO is not necessary.  The bank should implement the division as set forth in a court-signed decree.  If one or both parties cashes all or part of the account, most of the time, there is an early withdrawal penalty.

Consequently, the division of an IRA provides a time advantage, but a tax disadvantage; and the division of a 401(k) or pension provides a tax advantage, but a time disadvantage.

The process of divorce is often difficult.  The decision to get a divorce is often difficult. And once you’ve made the huge decision and begun the process, you are likely to want nothing more (and nothing less) than to be done with it.

One of the difficulties about the hugeness of the decision to divorce is that it may take a long time to reach the firm conviction that the marriage is at an end.  Most people find that they need to remain with “both feet” in the marriage until they have exhausted the prospect of saving the marriage.  But then, once there is a realization that the marriage is over, there can be the strong desire to be done with the divorce “yesterday.”  In retrospect, people regret having given the marriage a shot for as long as they did.

This can be a real problem with the financial aspects of marriage and divorce.  If you have “both feet” in the marriage, you are still entangled financially.  Once you decide to divorce, you are STILL entangled financially…until the process is complete.  While the divorce is pending, the process of getting unentangled financially can be miserably slow. The financial conflict one experiences with their spouse can seem like a hemorrhage that must be stopped, but cannot be stopped.

It is important to realize that the financial terms of the divorce will take shape eventually, but probably not as soon as you might wish.  Consider it as a “before” and “after” scenario, in which the “before” is living together as husband and wife, and the “after” is having the divorce complete and being unentangled regarding day-to-day finances.  It takes weeks, if not months, to get from the “before” to the “after.”  That may result in three or four months more of “financial jointness” than you bargained for – the consequence of making a careful, and not hasty, decision to divorce.  In the long run, you will likely sleep better knowing that dissolving the marriage was your last resort, after pursuing all other options.  But the process, in the short run, is an extremely difficult and stressful experience.

Minnesota law requires that the division of a marital estate to be “fair and equitable.”  The law does not require the division to be EQUAL.  But often equal is fair, and anything other than equal is not fair.  Here is why: if the parties reach an out-of-court settlement, they will negotiate the terms.  Both spouses will have to assent to the agreement.  It would not be surprising for the wife to be unwilling to accept less than half.  It would not be surprising for the husband to be unwilling to accept less than half.  Consequently, many out-of-court settlements constitute a 50-50 division of the property, which a reviewing court judge would find is consistent with the “fair and equitable” requirement.

Similarly, if the case goes to trial, for the court to decide, it would not be surprising for the court to find no reason to award the wife more than half, and it would not be surprising for the court to find no reason to award the husband more than half.  Consequently, many court decisions reflect a 50-50 division of the property, which would pass muster by a reviewing appellate court as consistent with the “fair and equitable” requirement.

In neither instance is the 50-50 division REQUIRED.

Conversely, a division of property that is OTHER THAN fifty-fifty may be consistent with the “fair and equitable” requirement, but the basis for that conclusion will need to be spelled out in more detail, because on its face it may appear to favor one party over the other.  This need for more detailed provisions for the non-equal-but-fair-and-equitable division goes for both out-of-court settlements and court-ordered divisions.

If you start the divorce process, your spouse has thirty days to respond to the petition.  What happens if the responding spouse does nothing during the thirty-day period?  Technically, the responding spouse is in default.

That means that the responding spouse has forfeited the opportunity to participate in the divorce process. This situation may sound advantageous, since it means that the court can enter the decree without hearing the responding spouse’s “side” of the story.  But there are drawbacks.  Most family court judges prefer to have both spouses involved in the divorce process, because of the likelihood that a defaulting spouse will approach the court later for relief.  Many issues, such as the parenting schedule for minor children, or the comprehensive disclosure of all debts, cannot be fully addressed without both parties being involved.  With one party absent, those issues are unresolved, possibly reserved by the court for future determination, and both the petitioning spouse and the court are left in limbo. So, if the divorce is finalized as a default, the responding spouse may come forward later, wanting to reopen the case.  Even if the responding spouse has no valid excuse for failing to respond, that will not necessarily prevent the responding spouse from CLAIMING to have a valid excuse for failing to respond.  If the court “hears out” the responding spouse, the petitioning spouse is likely to be drawn into in an additional “chapter” of the family court process.

Since the family court would rather open the case and shut the case once, without reopening the matter, the family court would rather get it done “right” the first time.  That can be hard to do without one spouse’s participation.  It is harder to have all of the relevant information properly disclosed and considered in the file without both parties actively present in the case.

Ultimately, it is better to have the case done by default than not at all.  If extra effort is made to involve the responding spouse, to no avail, then both the court and the petitioning spouse can be satisfied that proceeding by default is the right way to conclude the case.

When two spouses divide assets in a divorce, it is important to pay with attention to the tax consequences connected with certain assets.  The clearest example is retirement assets.  Usually, when someone receives a payment or distribution from a retirement account, it is a taxable event.  So, someone in a twenty-eight percent tax bracket, who receives a $3,000 payment from a retirement account will pay tax of $840 on that payment.  Essentially, instead of receiving $3,000, the person will receive net value of $2,160.

If in a divorce, one spouse receives a bank account with $3,000 and the other spouse receives a retirement account with $3,000, it may appear to be an equal award of property.  But since the bank account funds do not involve tax consequences, and the retirement funds do involve tax consequences, the division of assets is not really equal.

On a larger scale, this can have a substantial impact on the fairness of a property division.  If one spouse is awarded the marital homestead, with estimated value of $300,000, and a $200,000 mortgage, that spouse is essentially receiving a $100,000 asset.  If the other spouse accepts a $100,000 retirement account in exchange for the equity in the house, he or she will not be able to make use of the retirement funds without dealing with the tax liability connected with the retirement funds.  Assuming thirty percent tax liability, the spouse awarded the retirement account ends up with essentially $70,000, instead of $100,000.

It is common for the property division to be adjusted to provide for a fair division of assets that accounts for taxes.  For instance, in the above example, each spouse could be awarded $50,000 from the retirement account (and each consequently paying their own respective share of the taxes); and the spouse not awarded the house could be given a $50,000 lien on the house (or the house could be sold, and the proceeds divided equally).

In other cases, the property division might not be adjusted because other aspects of the property settlement are favorable in some way to the spouse receiving the taxable retirement asset.  What is important is for both spouses (and/or the family court judge) to be aware of the tax effect, and to make a purposeful decision about how to devise a fair property settlement in light of those consequences.

When a married couple owns a home, both spouses have an interest in the home, whether or not the house is titled in both spouses’ names.  So if one spouse lives in a home for two years before the marriage, then gets married, the other spouse’s name does not need to be added to the title for both spouses to have a marital interest in the home.  

The marital interest in the home stems from the money the spouses put into the home during the marriage, as well as any market appreciation in the home during the marriage. The spouse who owned the home before the marriage has a nonmarital interest in the house based upon the value of the home at the time of the marriage.  The home is presumed to be marital unless and until the spouse with a nonmarital interest proves his or her premarital ownership, and the value of the house at the time of the marriage.