UPDATES IN MICHIGAN FAMILY LAW

Depositions | Helpful tool in some divorces cases

James J. Harrington, III, an outstanding family lawyer from Novi, Michigan offers this valuable advice about discovery depositions in family law cases:

Depositions are certainly not required in every case or even most cases or even 70% of cases… however as to the remainder they are absolutely critical, mandated, and – arguably – the standard of practice requires them.

Before noticing a Deposition, I consider on a case by case basis the following:

Can interest in a retirement plan be waived in judgment?

According to Robert G. Spector, the Glenn R. Watson Chair and Centennial Professor of Law at the University of Oklahoma Law Center, on February 19, 2008,the United States Supreme Court accepted cert on Kennedy v. E.I. Dupont, 497 F.3d 426 (5th Cir. 2007).  The issue that the Court will consider is limited to the issue of whether a qualified domestic relations order ("QDRO") is the only valid way a divorcing spouse can waive her right to receive her ex-husband's pension benefits under ERISA.

Residency requirements for filing divorce

A party must reside in Michigan for at least 6 months and in the county where the divorce is filed for at least 10 days. If those jurisdictional requirements are not met, the divorce can be dismissed for lack of jurisdiction. In Berger v Berger __ Mich App __, __ NW2d __ (2008) (Docket No. 279025 decided January 31, 2008), the Michigan court of appeals dealt with a key issue of residency.

Will a prenup be enforced if it's not fair?

While fairness is, under the case law in some states, a requirement for enforcement of a prenuptial agreement, the court of appeals established in Reed v Reed, 235 Mich App 131 (2005) that little fairness is really required in Michigan.

In Reed, the parties executed a prenuptial agreement abut 6 weeks prior to the marriage. Mr. Reed was a recent law school graduate. Mrs. Reed had no independent counsel. Their combined net worth at the time of the marriage was less than $20,000. The marriage lasted about 20 years.
 

Getting a Fair Settlement: Discovering Hidden Assets

It's become more common these days for couples to seek a low-cost divorce, often with only one party being represented and the other party sometimes retaining a lawyer to look over the final paperwork. In cases such as these, lawyers are often given a list of marital assets and marital debts and asked to help a party devise a reasonable settlement offer that can be presented to the other spouse.

In other cases, where the financial asset/debt picture is more complicated, some discovery is usually warranted, and the attorney for the spouse who doesn't handle the finances may -- or may not -- send out what is called in my office "the burdensome and oppressive discovery requests." This is usually a "canned" set of interrogatories and requests to produce documents. It consists of about 20 pages containing than 100 requests, some of them with 5 to 12 subparts. Sometimes a lawyer will tailor the requests to the specific case, deleting ones that do not apply (not often enough, in my experience) or adding specific interrogatories that inquire into certain more unusal assets owned by the parties. Responding to these requests can take my client 40 hours or more. I resist the temptation to engage in the "what comes around, goes around" approach. If I believe that the other spouse really doesn't have a clue about the finances and hasn't hidden any monies -- this latter being based upon my client's statement that the other spouse (usually the wife) doesn't have access to the assets, then I do not send out discovery requests to that party. Instead, I advise my client to work hard to produce complete and accurate records.

In other cases, I represent the "clueless spouse" -- the one who's been kept in the dark. Then I recommend to my client that this thorough discovery or some modification of it be made. Usually the spouse agrees. Sometimes she doesn't authorize discovery because she wants to save money.

Now suppose that you are the client who wants to save money on legal fees and expenses. What is most appropriate for you? What will protect you?

National Chauvinistic Husbands Association?

Divorce filings in Japan surged 6.1% after a change in Japanese law. The law, enacted in 2003, but effective beginning in April 2007, entitles a wife to claim up to 50% of her husband's pension in a divorce.

Apparently, it took Japan a while to catch up with reality. In the U.S., pensions have been marital property since 1985. And this makes sense. Retirement plans represent nothing more than deferred income -- whether they are 401K plans that allow employees to defer income through payroll deductions until after the age of 55 or whether they are defined benefit plans that employers use as incentives (and instead of higher salaries in the present) to attract employees. Deferred income is marital property. After all, were it not deferred, it might represent other assets such as equity in a home, investment accounts, etc.

Treatment of "pre-inheritance transfer" of property in divorce

In Wells v Wells, Docket No 271465, decided on November 20, 2007, the COA upheld the Ottawa County Circuit Court where W challenged the T/C's distribution. 

W appealed the T/C's exclusion from the marital estate of H's partnership interest in a "Family Farm" that was owned and operated by H and his brothers. The COA characterized this property a pre-inheritance transfer from H's parents to their sons, which should be treated just as inheritances are by the T/C. The COA concluded that the T/C properly ruled that the partnership and his stock in the partnership formed with his brother was H's separate property and was properly excluded from the marital estate.

Mahr and other religious marriage contracts: Enforceable or not?

Recently, the issue of Islamic marriage contracts and other religious marriage contracts was discussed on the State Bar of Michigan Family Law Listserv. These contracts are common, particularly among family-arranged marriages. Essentially, they provide for payment of a small sum of money to the woman if the parties divorce.

Often, there is unequal (or no) bargaining power between the parties. Sometimes, the bride is a teenager whose marriage is arranged by her parents in way that is not usual by Americans standards, but one that is the normal course of family business in Islamic families.  The question then becomes, once a marriage breaks down, should the husband, often the titled owner of everything, walk away with everything? What if it's a long-term marriage? What if the husband is educated and has a high earning capacity and the wife is incapable of supporting herself and the children?   

A Beautiful Mind . . . an easier divorce settlement?

Remember John Nash, the schizophrenic mathemetician whose life was the subject of the film "A Beautiful Mind?" According to MSNBC today, August 3, 2007, using the "game theory" concepts Nash devised, a couple of Australians have develped computer software that is calculated to help divorcing couples divide their property without arguments and expensive mediation.

Their computer programs, (the earlier, "Family Winner," and the new one "Family Mediator" combine artificial intelligence, game theory and an electronic or human external mediator to help divorcing couples resolve their disputes fairly and rationally.

The MSNBC article Software seeks to resolve divorce disputes can be accessed here.

Technorati tags: divorce

Home appraisals for property distribution purposes

In many divorces, neither party wishes to keep the marital home or neither can afford to cash the other party out. In those cases, the parties normally each get an appraisal from a certified real estate appraiser. Depending upon the size, location, and value of the real estate, an appraisal can cost about $400 or it can cost far more.

Recently, another option has become available. You've probably seen pop-up ads or received what I would normally consider to be SPAM from Internet-based appraisal serves offering low-cost appraisals. I wondered how they could offer appraisals for so little money. The answer became clear today.

The Boston Globe reports on June 2, 2007 that, in pending class action lawsuits, a group of professional appraisers is suing a major mortgage technology firm, FNC. These lawsuits allege that FNC, which has wooed appraisers nationwide with sophisicated online appraisal processing systems, have been systematically appropriating the certified appraisers' report information at teh time FNC converts the information to digital format.

Once FNC has converted the reports, they are sent over the Internet to mortgage lenders. The lawsuits allege that FNC is stripping the information, storing it, and re-marketing it. The plaintiffs claim that FNC is selling data that it promised never to collect to lenders and also to compaines who are developing electronic substitutes for traditional appraisals.

The suit was filed last month by appraisers in Maryland, Virginia and Oklahoma against FNC of Oxford, Miss. FNC markets a high-tech system that converts traditional appraisals into electronic formats, then sends them to mortgage lender customers. FNC says it processes about 400,000 appraisals a month and deals primarily with the 45 to 50 largest mortgage lenders in the country.

The appraisers are seeking a minimum of $25 million plus punitive damages.

Tax dependency deductions and IRS Form 8332

It is not unusual during the course of settlement negotiations for the custodial spouse to give one or more of the tax dependency deductions to the non-custodial spouse. This is particularly true if the custodial parent earns substantially less than the non-custodial parent. Usually there is some quid pro quo for the deduction. Sometimes the release of the tax dependency deduction is part of child support negotiation, and at other times, it's linked to property settlement issues.

However, IRS regulations require that in order for a taxpayer to be legally entitled to the dependency deduction, certain explicit statutory requirements must be met. A non-custodial parent, regardless of whether a divorce decree awards the deduction, is not entitled to the dependency deduction unless the custodial parent releases the deduction. This is done by completing a valid written declaration (IRS Form 8332 or its equivalent) to the Federal tax return for the year the deduction is claimed. The beauty of IRS Form 8332 is that a custodial parent may relinquish more than one year on that form. The original Form 8332 must be attached to the first year's tax return and a copy must be attached to each subsequently claimed year.

Woe be unto him, however, who loses his or her copy of the form!

What should you know about alimony?

There is often confusion about what alimony is, about when and in what amount it might be ordered, about how long alimony might be payable, and whether or not it’s modifiable. As you can imagine, given the number of possibilities, an answer to some of these questions can be pretty complicated.

Let’s start with the obvious, though. Whether or not alimony (spousal support) will be ordered by a court is entirely dependent on the specific facts of each case.

What does the judge look at when deciding whether to award alimony, how much and for how long?

In Michigan, there are several factors that the judge will consider when deciding if an alimony award. These factors are similar to those used by judges in states other than Michigan. Among the factors a court may consider are these:

Can commissions, stock options, etc. received after filing be divided in a divorce?

A colleague asked today whether post-judgment earnings from accounts established by a broker during his marriage can be considered marital property subject to distribution during a divorce.  In the case at issue, the husband “receives thousands and thousands of dollars every year as ‘trailers’ for the accounts he has established during the marriage.  They can be compared to ongoing commissions or interest. The effort expended to establish these accounts occurred during the marriage.”

What was not specified is whether a final judgment of divorce has entered, but I make the following assumptions: (1) that no judgment has yet entered; (2) that substantial sums annually will be paid to the husband following entry of divorce; and (3) that the wife wishes to have an equitable distribution of the stream of future income attributable to these "trailers" (a word I assume must be something like a commission.)

There are two possible scenarios here. Obviously, the wife would prefer a cash award, but it may difficult to fix a value for these “trailers.” Whenever the value of an asset cannot be determining with reasonable certainty, a trial court will reject assigning a value. However, what if the husband has been receiving trailers for a number of years? Doesn’t the problem then become more similar to determining the present value of a business based upon an average of the annual receipts?

Division of Defined Benefit Plan by Amended Judgment and QDRO

The Michigan Court of Appeals decided an interesting case on February 27, 2007. There are some practice pointers here for Michigan lawyers.

Husband challenged the trial court’s entry of a qualified domestic relations order ("QDRO") awarding Wife 50 percent of any early retirement benefits the defendant-husband might receive under his employer’s pension plan years after the Judgment of Divorce was entered (pre-Quade). The original JOD had not awarded Wife any of the separate and distinct components of the pension such as early retirement supplements. Husband, relying upon Quade, claimed that because the separate and distinct components of his pension plans were not specifically awarded in a judgment of divorce, they could not be included in a QDRO But the COA held that because the trial court also ordered the entry of an amended judgment of divorce specifying the plaintiff was to receive 50 percent of each component, the QDRO was proper as was division of the separate components. The COA cited MCR 2.612(A)(1), stating that the trial court had the power to correct clerical mistakes in judgments, orders, or other parts of the record as well as errors arising from oversight or omission.

What this meant for the wife was that valuable benefits of the defined benefit pension plan that might have been foreclosed to her were opened up because the trial court entered the amended judgment of divorce--rather than entered a modified QDRO.

Now That's Classy!

In a week when the State Bar of Michigan Family Law Listserv spent time discussing what to do when divorcing couples are fighting over custody of Fido, this report, from the Wealth Report, a blog by Robert Frank of the Wall Street Journal, makes us smile. According to that report:

“Tim and Edra Blixseth spent 25 years building a $2 billion life together.

When they decided to divorce, they spent a single afternoon in the Beverly Hills Hotel, dividing it all up. With just two notebooks and a bottle of wine, the Blixseths -- California real-estate tycoons and founders of the famed Yellowstone Club -- finished the job in a matter of hours.

No attorneys. No accountants. No judges.

She kept their 420-acre estate. He got the house in Mexico. He kept his land businesses. She kept the dogs. They each got a Rolls Royce, and they will share their three private jets. “

They will share a business that they operated jointly, and she will keep her start-up business. To read the full report see the Wealth Report, January 2, 2007.

To contact Jeanne Hannah or to view her Family Law website, click here.

Transfer of all Marital Assets to Spouse in Judgment of Divorce May be set Aside by Creditors

In an issue of first impression, the Michigan Court of Appeals considered whether a party may dispose of all of his assets to avoid payment of damages in a pending wrongful death case by transferring 100% of the marital assets to his spouse by means of an uncontested divorce judgment.

The Court of Appeals held that such a transfer could be set aside in a supplementary action as a fraudulent transfer under the Uniform Fraudulent Transfer Act (UFTA) as to a creditor of the transferring spouse. Estes v. Titus, Docket No. 261968, decided on December 21, 2006. (For Publication)

The Devil Made Me Do It

In League v League, Docket No. 261058 decided by the Michigan Court of Appeals on October 19, 2006, the defendant husband argued, in essence, “The devil made me do it.”

In a completely narcissistic argument, he attempted to make plaintiff wife responsible for half of the nearly $300,000 debt of restitution he owed their homeowner’s company after he burned down the parties’ marital residence and contents. He claimed this was caused by his wife’s extramarital air with another man. (Not that hubby was pure as the driven snow; he’d earlier had his own little peccadillos – which he dismissed as “mere encounters”).

The Court of Appeals resoundingly rejected his argument, stating:

Separate Property Award and Interest

Pathetic, isn’t it, when a spouse has to appeal a judgment of divorce granted in 1993 to the court of appeals three times to get her fair share of the marital assets and the property division in the case drags on for thirteen years – and longer! In a decision yesterday, the Michigan COA once again was forced to remand to the trial court for redetermination consistent with its decision.

In Cipriano v Cipriano, Docket No. 259818 (Cipriano III), decided by the Michigan Court of Appeals on July 25, 2006, the court made some important rulings with regard to separate property claims.

Bizarre End to Separate Property Dispute

In a bizarre twist to a hotly disputed divorce in New York State, a doctor blew up his building in Manhattan -- a building that had been appraised at over $5 million. Sounds like "War of the Roses" ! The appellate decision would force him to sell the real estate. His explosion -- which he survived -- was apparently his way of saying, "If I can't have it, then neither can you."

The doctor had claimed that the building was his separate property, inherited from his parents. However, the appellate court held that it made no difference whose name was on the title. Title alone could not deprive the wife of her community interest in property that had been acquired with marital funds, that had been improved with marital funds, and that had appreciated due to efforts made by the wife.

Surely the result was in accord with some of Michigan's recent cases involving separate property claims -- Bone v Bone, 148 Mich App 834, 838 (1986); Hanaway v Hanaway, 208 Mich App 278 (1995); Reeves v Reeves, 226 Mich App 490, 575 NW2d 1 (1997).

Read the New York appellate court's opinion here.  Bartha v Bartha

A New York Times article may be accessed here. There are links to some specacular slide shows on the NYT website.

Can a Former Spouse Keep Life Insurance Proceeds She's Waived if Former Husband Forgets to Change Beneficiary on the Policy?

In Sweebe v Sweebe, Michigan Supreme Court Docket No. 126913, decided on April 26, 2006, the Michigan Supreme Court held that a former wife who had waived her right to life insurance proceeds could not retain those proceeds that had been delivered to her by the Plan Administrator of an employer-provided life insurance policy when the former husband had failed to change the name of the beneficiary prior to his death. To read the entire decision, click here.

To contact Jeanne Hannah with your questions or to view her Family Law website, click here.

Valuation of an Oral Surgery Practice

Shiro v Shiro, decided yesterday by the Michigan Court of Appeals, presents interesting issues, including valuation of an oral surgery practice where the trial court increased the valuation of the only expert witness. The valuation was based upon an assumption that the defendant would only work 1,320 hours per year. The industry standard is 1,600 hours per year. In 2001, the defendant had worked 2,750 hours, but he reduced his schedule and in 2002 he worked 2,100 hours. The court refused to ignore his past work history and the reality of what was a reasonable expectation for a business as an ongoing concern. Thus, the Court elected 1,800 hours/year as a reasonable basis for the valuation.

How the other half lives: Other interesting issues involved the alimony award for a significant number of years at $15,000/month, and the disposition of certain interesting personal property including four "jet kits" [kits from which to assemble jet planes], an Albatross jet, a boat, and a hot air balloon.

To contact Jeanne Hannah with your questions or to view her Family Law website, click here.

Postema Claim Available to Compensate for Putting Hubby Through Internship and Residency

In an unpublished opinion released July 7, 2005, the Court of Appeals decided issues involving a Postema claim. The Court held that Defendant wife had a Postema claim for reimbursement for her contributions during the years that Plaintiff husband did his residency and internship, obtaining a medical specialty in anesthesiology.

You will want to read the Court opinion on the valuation of the medical practice, as well.  See Greenslait v Greenslait, [Unpublished Docket No. 01-000063-DM], Mason County.

To contact Jeanne Hannah with your questions or to view her Family Law website, click here.

Property Settlement Agreements: The Benefit of Incorporation without Merger

In this interesting case, the parties’ PSA was reached after an agreement and was based upon Husband’s representations as to the value of his car dealership. The mediator valued it at $1.7 million. Husband had prevented any meaningful appraisal by Wife’s expert. Wife accepted the mediator’s recommendations, and the parties' PSA was incorporated but not merged in the judgment of divorce.

When, prior to entry of judgment, Wife learned that Husband was selling the dealership, she sought to avoid the PSA. Husband testified at a hearing that its value was no more than $1.1 million and that he intended to operate it for at least 11 years until he retired. A few months after the judgment was entered in July 2000, he sold the dealership for $6.6 million.

The parties’ Indian River property was appraised at $1.25 million. Husband falsely represented that he just loved “every nook and cranny” of the place and induced Wife to sell him her one-half interest. He listed it only weeks later and sold it for $1.775 million.

Greed getting the better of Husband, he then sought to reduce his alimony. Of course, discovery was taken, which revealed the true facts of the sales. Wife filed suit for fraud in December 2002--about 18 months after the judgment was entered. The jury verdict was $1,417,000. Husband appealed.