PROTECTING ASSETS

 
 


Alimony/Spousal Support

Under MCL §552.13, .23, and Maake v Maake, 200 Mich App 184, 187, 503 NW2d 664 (1993), should the court award spousal support to either party? Should the spousal support be traditional modifiable spousal support or alimony in gross? Under §71 and §215 of the Internal Revenue Code, what are the federal income tax consequences of such an award?

Under Parrish v. Parrish, 138 Mich App 546, 361 NW2d 366 (1984) There are several factors that a court must consider in determining whether or not to award spousal support.  These factors are:

    1. The past relations and conduct of the parties.
    2. The length of the marriage.
    3. The ability of the parties to work.
    4. The source and amount of the property awarded to the parties.
    5. The age of the parties.
    6. The ability of the parties to pay alimony.
    7. The present situation of the parties.
    8. The needs of the parties.
    9. The health of the parties.
    10. The prior standard of living of the parties and whether either is responsible for the support of others.
    11. General principals of equity.

There are two types of arrangements: (1) traditional alimony, which terminates upon the death of the recipient or his/her remarriage; and (2) alimony in gross, which constitutes a lump-sup or payment schedule for a specific period of time.  Because there is no specific formula for determining the amount and duration of spousal support payments, expert counsel is essential to achieving the appropriate level of support.

There are alimony guidelines, namely: The Prognosticator and Guidelines developed by Craig Ross, an Ann Arbor lawyer, which give an insight into whether or not alimony or spousal support will be awarded.  These guidelines are not binding.  There is a conflict among Circuit Court Judges as to whether or not the guidelines should even be used in awarding alimony or child support because the alimony guidelines are incomplete on the above eleven factors

 

Cobra Coverage

    • What are the strategic implications of health insurance coverage for an employee’s former spouse as provided under the Consolidated Omnibus Reconciliation Act of 1986 (COBRA)? See IRC 4980B, 5000. Who will pay the premiums for the COBRA coverage?

Marital Estate

    All of the parties” assets and debts, whether owned and owed jointly or separately, are considered by the court in making an assessment as to what assets and liabilities are included in the marital estate.

    • What assets should be excluded from the marital estate?

    These might include assets covered by a valid antenuptial agreement, Rinvelt v Rinvelt, 190 Mich App 372, 475 NW2d 478 (1991); gift or inheritance property, Charlton v Charlton, 397 Mich 84, 243 NW2d 261 (1976); or property a party owned before the marriage, Reeves v Reeves, 226 Mich App 490, 575 NW2d 1 (1997); Rogner v Rogner, 179 Mich App 326, 445 NW2d 232 (1989). Did an increase in value during the marriage reflect active involvement by one of the spouses or purely passive appreciation? Active appreciation is typically held to be marital property, while passive appreciation remains separate property.

    • What are the fair market values of all assets in the marital estate?

    In Steckley v Steckley, 185 Mich App 19, 640 NW2d 255 (1990), the trial court erred in not determining the value of plaintiff’s interest in several restaurant franchises and in awarding plaintiff his entire interest on the ground that the proofs did not establish a basis on which an accurate valuation of plaintiff’s interest could be made. Defendant was entitled to an equitable share of the valuation of plaintiff’s interest in the franchises. The appeals court held that if the trial court did not have ample information from the expert testimony to determine a fair value, it could appoint its own disinterested appraiser. See Wiand v Wiand, 178 Mich App 137, 443 NW2d 464 (1989) (party seeking to include asset in marital estate bears burden of proving its value).

 

Property Division of Marital Estate

    • How will the assets in the marital estate be divided? How will the liabilities be allocated?

    The marital estate is divided based upon an equitable distribution standard.  This does not mean that property awarded to each party must be precisely equal; however, the division of property must be fair and equitable under all of the circumstances of the case.  Usually a 50/50 division of the assets in the marital estate.

    Marital property includes property acquired by the joint efforts of the parties during the marriage; such as, (1) real property; and (2) personal property. There are also financial assets like cash, investments, and pension/contributory employment funds.  It may be The effective transfer of all interests in real property, personal property, stocks, bonds, bank accounts and retirement plans, with Qualified Domestic Relations Orders, (“QDROs”), and Eligible Domestic Relations Orders, (“EDROs”), require properly executed documents.

 

Factors to be considered by the Court are the same factors that are considered in an award of alimony.

A Careful review and analysis of the identification and evaluation of each asset in the marital estate must be developed which includes not only the identification and valuation of each asset, but what tax consequences will occur and how will enforcement of the property division be accomplished.  Strategic preparation and planning can avoid unnecessary litigation and expense. 
Divorce can also be financially devastating for both parties.  There are inevitably conflicts over financial resources, as well as the accumulated physical property and possessions. 
Depending on the circumstances, these proceedings can be complex and contentious.  A client needs an experienced lawyer to make sure the client’s needs and expectations have the voice they deserve. 
 

Attorney Fees and Expert Witness Fees

    • Who should pay attorney fees, witness fees, and the costs of the litigation?

    Attorney’s fees in a divorce action are not recoverable as a matter of right, but may be awarded when necessary to preserve a party’s ability to purse or defend the action.  Maake v. Maake, 200 Mich App 184, 189, 503 NW2d 664 (1993). 

 

The award of attorney fees in a divorce action is governed by MCR §552.13(1), which states:

(1) In every action brought, either for a divorce or for a separation, the court may require either party to pay alimony for the suitable maintenance of the adverse party, to pay such sums as shall be deemed proper and necessary to conserve any real or personal property owned by the parties or either of them, and to pay any sums necessary to enable the adverse party to carry on or defend the action, during its pendency. It may award costs against either party and award execution for the same, or it may direct such costs to be paid out of any property sequestered, or in the power of the court, or in the hands of a receiver.

(2) An award of alimony may be terminated by the court as of the date the party receiving alimony remarries unless a contrary agreement is specifically stated in the judgment of divorce. Termination of an award under this subsection shall not affect alimony payments which have accrued prior to that termination.
 

Additionally, MCR §3.206 [c], a party in a domestic relations matter is entitled to request attorney fees if that party is unable to bear the expense of the action and the other party has such an ability. The rule provides:

(1) A party may, at any time, request that the court order the other party to pay all or part of the attorney fees and expenses related to the action or a specific proceeding, including a post-judgment proceeding.

(2) A party who requests attorney fees and expenses must allege facts sufficient to show that
[a]  the party is unable to bear the expense of the action, and that the other party is able to pay, or
[b]  the attorney fees and expenses were incurred because the other party refused to comply with a previous court order, despite having the ability to comply. 1


Divorce Taxation

Federal tax law affects many aspects of a divorce settlement. Almost every divorce has some tax issue that warrants attention by counsel. For high-end cases, it may be selecting the most appropriate method, from a tax standpoint, by which one spouse will buy out the other’s marital property interest in a closely held company or professional practice. In more modest circumstances, there are often tax considerations regarding exemptions for dependent children.

Federal tax law affords divorcing parties considerable flexibility to structure divorce settlements to their mutual advantage. At the same time, however, it is a minefield for the unwary. Familiarity with how tax law affects divorce settlements enables family law practitioners to take advantage of planning opportunities for their clients while avoiding tax pitfalls.

 
ENFORCEMENT OF JUDGMENT
Once a divorce has been reduced to judgment, the divorce court has jurisdiction to make any order proper to fully effectuate its judgment.  MCL §600.611.  Courts may order enforcement devices even if the parties have not agreed on them. Carlson v Carlson, 139 Mich App 299, 362 NW2d 258 (1984) (property settlement remanded to include some method of securing installment obligation).
An independent action is not required to enforce a judgment’s property settlement provision. Landy v Landy, 131 Mich App 519, 345 NW2d 720 (1984).  Provisions regarding property distribution may be enforced by filing a motion in the trial court. See, e.g., Rotzell v Rotzell, 241 Mich 122, 216 NW 400 (1927); Lawrence v Lawrence, 150 Mich App 29, 388 NW2d 291 (1986). Courts have broad powers to fashion the remedies needed to afford complete equity and conclude the controversy. Walworth v Wimmer, 200 Mich App 562, 504 NW2d 708 (1993) (shorter redemption period imposed for mortgage foreclosure); Cohen v Cohen, 125 Mich App 206, 211, 335 NW2d 661 (1983).

If a property settlement agreement was not merged into the judgment, an independent contract action must be filed. Marshall v Marshall, 135 Mich App 702, 355 NW2d 661 (1984). 2
    1 The Staff Comment to this amendment indicates that this provision was modified in April 1, 2003, effective September 1, 2003, in an attempt to reduce the number of hearings stemming from vindictive or wrongful behavior, to shift the costs associated with wrongful conduct to the party engaging in the improper behavior, to remove the ability of a vindictive litigant to apply financial pressure to the opposing party, to create a financial incentive for attorneys to accept a wronged party as a client, and to foster respect for court orders.

    2 Michigan Family Law Benchbook ch 8 (ICLE 2d ed 2006 & Supp), at http://www.icle.org/onlinebooks/family/book/2006553550/chap08.xml (last updated 6/8/2007).

 
The information you obtain at this site is not, nor is it intended to be, legal advice.  You should consult an attorney for individual advice regarding your own situation.