It is important to recognize that all assets are considered part of the marital estate unless proven otherwise by a "preponderance of the evidence." This places a significant burden on any person making a non-marital claim.

It is essential that any and all documents including documents of title, receipts, or canceled checks that support your non-marital claims must be provided. Any failure to provide documentation may result in the division of the asset in the divorce.

If one party had a non-marital asset and sold that asset or traded it for another asset, in some states it is also possible to trace that non-marital interest by showing a paper trail following the non-marital proceeds into the new asset. The new asset, however, must be something specifically identifiable, like a house, a car or perhaps an investment plan.

Some states even offer a party with a non-marital interest added value on that investment that is due to passive appreciation of the asset. "Passive Appreciation" refers to the increase in the value of the asset based on market fluctuations and which is not due to any work or improvements made to the property during the marriage. Allowing a party to claim a non-marital interest plus passive appreciation is adopted by only a small number of states. Minnesota offers a simple formula illustrating how passive appreciation works. In Minnesota the Schmitz formula is used in determining the marital versus non-marital interests in real estate. Since real estate mortgages and other encumbrances against property are paid off over a significant period of time, marital interests may be created in real estate that was owned by one party before the marriage. As encumbrances are paid off during the marriage, a marital interest is created.

The formula states that the proper calculation of a non-marital interest may be derived by determining the ratio of equity to market value at the time of the marriage and then using that same fraction to determine non-marital interest at the time of divorce. For example, lets assume a spouse owns a home prior to marriage and that home has a value of $100,000 at the time of the marriage and that is encumbered by a mortgage of $75,000. The $25,000 equity (the difference between the value and the encumbrance) becomes the numerator in the Schmitz formula and the value of $100,000 becomes the denominator. As a result, the non-marital interest is 25% of the home's value. If the home appreciates to $200,000, the spouse with the non-marital interest may claim the first $50,000 as the non-marital interest and any remaining equity would be divided as marital.

The limitations of this formula are obvious.

First of all, it may be very difficult to determine with any degree of accuracy the value of real estate at the time of marriage unless an appraisal is done at that time. That value alone may become a contested issue that results in litigation and testimony of experts.

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