Family Trusts During Impending Divorce Minnesota

Family Trusts During Impending Divorce in Minnesota

If you’re dealing with family trusts during an impending divorce, it’s important to understand the basics of how Minnesota law treats these trusts in divorce scenarios. Being well informed will help you to protect your assets and ensure a fair division. Please note that this article is general in nature, and it’s important to seek professional financial and legal advice when going through a divorce.

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor, wealth manager, and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

How does a divorce affect a family trust in Minnesota?

Navigating the complexities of a divorce can be challenging, and understanding the interplay between family trusts and divorce proceedings in Minnesota can add another layer of intricacy. 

Before we dig into the details, please note that this post isn’t a substitute for professional advice. We recommend you speak with an attorney about your trust. In addition, please make sure you have a financial advisor who can help you through this difficult financial transition.

Table of Contents

  1. How do I protect myself in the division of assets in a Minnesota divorce?
  2. Is my spouse entitled to my inheritance in Minnesota?
  3. What are non-marital assets in a divorce in Minnesota?
  4. Navigating Family Trusts and Assets During Divorce in Minnesota

Navigating the Complexities of a Divorce Can Be Challenging

Marital or Non-marital Property

In Minnesota, a family trust’s susceptibility to divorce proceedings largely hinges on whether the trust’s assets are categorized as marital or non-marital property. Generally speaking, family trusts that were established before marriage and funded with assets owned before the marriage (or with gifts and inheritances received individually during the marriage) are typically considered non-marital. This means they often remain untouched during a divorce.

However, if marital funds or assets were contributed to a trust during the marriage, then those contributions and any growth associated with them might be considered marital property. In such cases, they could be subject to division during the divorce process.

Who Controlled the Trust May Matter

Another crucial factor is the discretion and control over the trust. If one spouse has significant control or discretion over the trust’s distributions or operations, a court might look more closely at its assets, even if it was originally intended as a separate property trust.

It’s also worth noting that, in some situations, the income generated by a trust (even if the trust itself is considered non-marital) could be considered when calculating spousal maintenance or child support obligations.

Given these complexities, it’s essential for individuals in Minnesota facing a divorce to consult with an attorney well-versed in both family law and trusts. They can provide guidance tailored to one’s unique situation, ensuring the most equitable and fair outcome.

Family Trusts Minnesota

How do I protect myself in the division of assets in a Minnesota divorce?

Protecting your interests during the division of assets in a Minnesota divorce involves both understanding the state’s laws and adopting proactive strategies.

Here are 7 ways you can safeguard your assets before you get divorced:

1. Understand Marital vs. Non-Marital Assets

In Minnesota, assets acquired during the marriage are generally considered marital property and are subject to division. However, assets acquired before marriage or received as gifts or inheritances during the marriage are usually deemed non-marital and typically remain with the original owner. Familiarizing yourself with these definitions can help you identify which of your assets may be at risk.

2. Maintain Clear Documentation

Keeping clear and thorough records of your assets is vital. This includes documentation that proves when and how you acquired an asset, especially for those you consider non-marital. Bank statements, purchase receipts, or inheritance documents can serve as valuable evidence.

3. Avoid Commingling of Assets

If you have non-marital assets, try to keep them separate from marital assets. For instance, if you inherit money, avoid depositing it into a joint bank account. Once non-marital assets are mixed or “commingled” with marital assets, distinguishing them can become challenging, and they may become subject to division.

4. Prenuptial and Postnuptial Agreements

If you’re already married and didn’t sign a prenuptial agreement, it’s not too late to consider a postnuptial agreement. These legally binding documents can specify how assets will be divided in the event of a divorce and can offer significant protection.

5. Engage a Knowledgeable Attorney

A seasoned family law attorney, particularly one familiar with Minnesota’s specific regulations, can be your most valuable asset. They can offer tailored advice, ensure you don’t overlook any critical details, and represent your interests during negotiations or court proceedings.

6. Stay Transparent and Honest

While it’s natural to want to protect your assets, attempting to hide or undervalue them can backfire significantly. Courts do not look favorably upon dishonesty, and you could end up in a worse position if caught.

7. Consider Mediation

Mediation, where a neutral third-party assists the couple in reaching a mutually satisfactory agreement, can be a constructive way to address asset division. It often results in more personalized solutions and can be less adversarial than traditional court proceedings.

Family Trusts During Divorce in MN

Is my spouse entitled to my inheritance in Minnesota?

In Minnesota, inheritances are generally viewed through the lens of marital and non-marital property distinctions.

Typically, an inheritance received by one spouse, whether before or during the marriage, is considered non-marital property. This means that it is usually not subject to division during a divorce and remains the sole property of the spouse who received it.

However, there are situations where this clarity can blur:

1) Commingling of Assets: If the inheritance is mixed or “commingled” with marital assets, its designation as non-marital can be jeopardized. For instance, if you deposit your inheritance into a joint bank account or use it to purchase joint property, it might become difficult to distinguish it from marital assets, and it could then be subject to division.

2) Contribution to the Marital Estate: If your inheritance was used in a manner that benefits both spouses or the marital estate such as renovating a jointly-owned home, it might be argued that at least a portion of the inheritance has become marital property.

3) Growth and Income from the Inheritance: While the principal amount of the inheritance (the initial amount) might remain as non-marital property, any income or growth generated from it during the marriage might be viewed as marital, depending on how it’s managed or invested.

To ensure your inheritance remains protected in a divorce:

  • Keep thorough and clear documentation of the inheritance’s source and any related transactions.
  • Consider keeping the inheritance separate from marital assets.
  • If you wish to use the inheritance for joint purposes, consider discussing it with an attorney to understand potential implications.
  • Regularly consult with a knowledgeable family law attorney in Minnesota, especially if you foresee potential disagreements or complications regarding the inheritance during divorce proceedings.

What are non-marital assets in a divorce in Minnesota?

In Minnesota, as in many states, the distinction between marital and non-marital assets plays a pivotal role during divorce proceedings, determining how property is divided between the spouses. Here’s a breakdown of what constitutes non-marital assets in the context of a Minnesota divorce:

1 – Pre-Marital Ownership 
Any asset that a spouse owned before entering the marriage typically remains that spouse’s non-marital property. For example, if you had a savings account or a piece of real estate before marrying, those would be considered non-marital assets.

2 – Inheritances 
Assets that one spouse inherits, whether before or during the marriage, are generally considered non-marital property. This remains true as long as the inherited assets are kept separate from marital assets.

3 – Gifts 
Gifts given to one spouse, excluding gifts between spouses, usually fall under non-marital assets. For instance, if a friend or a family member gifted you a piece of jewelry or a sum of money, it’s typically considered your non-marital property.

4 – Exclusions Defined by Agreements 
Prenuptial and postnuptial agreements can specifically define certain assets as non-marital. These agreements, when legally sound and valid, can be powerful tools in keeping specified assets outside the marital pool.

5 – Certain Personal Injury Settlements 
If one spouse receives a settlement for personal injuries, the portion meant to compensate for pain, suffering, or personal losses (rather than lost wages or medical expenses) may be considered non-marital property.

6 – Property Acquired After a Legal Separation
If assets are acquired after a couple legally separates (but before the divorce is finalized), those assets might be deemed non-marital, depending on the specifics of the legal separation agreement.

A significant point to remember is the potential for non-marital assets to become “commingled” with marital assets, making them difficult to distinguish and potentially transforming them into marital property. For instance, if you deposit an inheritance (a non-marital asset) into a joint bank account, it can become commingled with marital funds.

To protect the status of non-marital assets during a divorce in Minnesota, it’s crucial to maintain clear documentation and separation of these assets from the marital pool. Consulting with a Minnesota family law attorney can provide insights tailored to your situation, ensuring a fair and clear division of assets.

Protecting yourself and ensuring a fair division of assets during a Minnesota divorce might seem overwhelming. 

The key is understanding your rights and being well-prepared. One approach is to maintain clear records of your financial assets and contributions. Legal counsel is invaluable in these circumstances, providing insight into the state-specific nuances of asset division. It’s beneficial to be proactive and consult an attorney early on to avoid potential pitfalls.

In the realm of divorces in Minnesota, the term “non-marital assets” carries significant weight. These assets, in general, remain with the original owner after the divorce is finalized. However, it’s vital to maintain documentation proving the origin of these assets, as challenges can arise. Instances where non-marital assets get mixed with marital ones can complicate matters, making their clear distinction all the more crucial.

Remember, every situation is unique, and having expert guidance can be invaluable in navigating the complexities of inheritance during a divorce.

Connect with a Financial Advisor

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

About the Author

Mike Rogers

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

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Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Generational Wealth and the Gift of Financial Freedom

Those who receive an inheritance with the passing of a loved one are potentially given the gift of financial freedom if they choose to manage the wealth carefully.

Did you know that only about one-third of adults have a prepared will, and about 40% with investable assets of $1 million or more never discuss their estate plans with their children? The reality, however, is that the percentage of squandered inheritances is troubling. Studies indicate that 70% of inheritances are exhausted by the second generation, and a whopping 90% is gone by the third.

There are a variety of causes for the money to deplete so quickly, including spending sprees on unnecessary expenses (fancy toys, expensive clothes, jewelry, and lavish vacations), poor financial decision-making, taxes, and a lack of communication between parents and children.

While family conversations about legacy and inheritance are important first steps in estate planning, discussing money matters can be stressful and emotional, so it’s common for parents to avoid the topic instead. Other reasons that may make parents hesitant to talk to their children about passing down their wealth include:

  • Entitlement – Children may feel as if they are better than everyone else because they are receiving a significant amount of money.
  • Motivation – Knowing that one day they will have money passed to them will affect their motivation to pursue their own financial journey.
  • Wealth managementParents want children to understand how to manage money and if they know money will be given to them one day, they may be inclined to consider what material things they will buy instead of understanding the value of managing their finances.
  • Understanding the value of a dollar – Having to work for your own money forces you to understand the value of a dollar and that money isn’t made easily.

At what age should parents and children discuss estate planning and inheritance?

Children can benefit from understanding the emotionally and financially complex world of financial planning as early as their 20s. They can learn the structure, details, and management of an estate plan and the importance of wealth preservation when it is passed down in the future. Being prepared can help to mitigate problems, challenges, and risks that could appear later on.

Beneficiaries that are intent on making their inheritances work for them can take steps toward financial independence by considering the following:

  • Resist the urge to spend the money and continue living as you were before.
  • Consider safe investment opportunities based on your risk tolerance.
  • Consult a financial professional.

How can parents get started talking to their children about their wealth?

Transparent communication

Parents should be open and honest with their children about their finances. This can open the door for questions and essential conversations on what the parents expect and hope for when it comes to the financial management of their assets.

Share values

Both parents and children can share their values and work to align expectations. Once children understand their parent’s wishes, parents may be more open to discussing inheritance regardless of the children’s age.

Schedule an appointment with a financial professional

Consider scheduling an appointment with a financial professional who can help you manage your inheritance by creating investment and savings strategies and long-term goals.

Create a plan

Preparation is critical when it comes to pursuing any long-term goal or strategy. A financial professional has the skills and experience to help both parents and children understand how to manage their finances now, and design a plan for the future with the knowledge that estate and tax law and the market may be completely different than it is today.

Schedule that appointment today and get a head start on working to preserve your hard-earned wealth for generations.


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Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This script was prepared by LPL Marketing Solutions


How to Talk to Your Kids About Their Inheritance – Bloomberg

Twilight Of A Golden Age: The Retirement Of A Once-Strong Middle Class | Seeking Alpha

Family inheritance talk: How to help build trust and plan for tomorrow | Wells Fargo Conversations (

LPL Tracking # 1-05371057

3 Estate Planning Tips for Small-Business Owners

For business owners, estate planning may seem like another task to do on a long to-do list.

Having a solid estate and succession plan in place may be crucial to your business’s long-term success. If you are incapable of making business decisions, or if you unexpectedly pass away without an estate plan, your heirs may scramble to keep your business afloat.

Here are three tips that may make the estate planning process less stressful.


1. Begin With the Basics

When making an estate or business succession plan, start with a workable outline. Do not be afraid to set out a plan that still needs some fine-tuning. Put your ideas in writing. Even simple notes are better than leaving your loved ones without guidance and scrambling while dealing with emotional turmoil.

Some factors to consider when drafting a will and basic estate plan include:

• Who would you like to run your business in your absence? Should this person be a full owner, part owner or simply a manager?
• What framework would you like your heirs or loved ones to use to resolve business-related disputes in your absence?
• Do you want to restrict business ownership to family members or allow others to invest?
Imagining the future of your business helps to make big-picture estate planning decisions.


2. Make Your Plans Tax-Efficient

An attorney may help you write a will and a business contingency plan but may not be the best professional to work on tax issues. A financial professional may work with you on the process of succession. The goal is to transfer your business with a strategy that manages the impact of state, federal, and local income taxes on the transaction.


3. Discuss Your Intentions with Those Affected

One of the biggest sources of friction in the business transition process may come from the hurt feelings of those involved. Interfamily disputes may come up from miscommunication or unmet expectations. If your child has counted on being tapped to run the business in your absence, only to see that you named someone else to this role, it can be tougher for your loved ones to rally together.

Even if you suspect that this discussion may lead to some conflict, it is important to communicate your intentions and plans with those affected by them. The time to work on these issues is before they are needed, not after it is already too late.


Read More:

Multigenerational Estate Planning Tips

Estate Planning in Minnesota



Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
This article was prepared by WriterAccess | LPL Tracking # 1-05233601