What is the Schmitz Formula?

Dividing a house or other real estate that was purchased during a marriage is often very straight forward.  What if a spouse bought a house before the marriage?  How does that get divided?  Here is an example of this issue:

Wife bought a house in 2002 for $150,000.  She paid $20,000 as a down payment taking out a mortgage for the rest.  Wife and husband marry in 2007 and during the marriage they upgraded the kitchen, remodeled the bathroom and had a new garage built where the old one stood.  The real estate increased over the years to $225,000.  Wife wants to keep the house.  What is the husband entitled to for his interest in the value of the house?

Minnesota law recognizes non-marital property, for example a house purchased prior to a marriage, as well as marital property, which is the increase of the value of the house during the marriage.  But when non-marital property and marital property intertwine, the math gets complicated.

The Minnesota Supreme Court created a calculation called the Schmitz formula based a couple who had the same problem with this math.  The formula is used to determine what the value of the marital share is to the divorcing couple.  The formula, while helpful to have, can be problematic if a couple refinanced a mortgage during the marriage or they took out a Home Equity Line of Credit (“HELOC”).  It is wise to speak with an attorney about dividing real estate purchased prior to and during a divorce because this sort of investment is often the most valuable asset couples have.  Finding a way to protect real estate and its value helps secure one’s financial future.

Do you have questions about real estate in a divorce?  Contact experienced family law attorney Jessica L. Sterle to schedule a consultation by calling (218) 722-2655.