Tag Archives: Divorce

Divorce Proceedings, the Death of a Spouse, and Marital Assets

Divorce Proceedings, the Death of a Spouse, and Marital Assets

In Nelson v. Nelson, A14-0200, (Minn. Ct. App. Oct. 6, 2014), the Minnesota Court of Appeals held that Minn. Stat. 518.58, subdivision 1a, which prohibits spouses contemplating divorce from transacting in or using marital assets so as to obtain a loss or profit without first getting consent from the other spouse’s consent, applies only to dissolution proceedings, and, therefore, do not apply when dissolution proceedings are terminated by a party’s death.

Nelson v. Nelson

In this case, the appellant, Kimberlee Nelson and her husband, Michael Nelson, were married in 1996. His will intentionally omitted his wife as a beneficiary of the estate. In 2007, he bought a life insurance policy with a million dollar benefit, naming his wife as the primary beneficiary, with the premiums being paid by his business. Then, in February 2012 he asked an attorney to prepare a joint petition and stipulation to dissolve his marriage to Kimberlee. Before he initiated the divorce proceedings, he changed the beneficiary of his life insurance policy to his parents and sister. After doing so, in May 2012 he served Kimberlee with a summons and petition for divorce. He died in September 2012, before the marriage could be dissolved.

After Michael died, his mother was appointed personal representative, and Kimberlee, his widow, asked for the rights of a surviving spouse despite the being excluded from her husband’s will, including homestead rights, a family allowance, household furnishings, and an elective share of his estate. She also brought a declaratory judgment action, claiming that the change of designated beneficiary of the life insurance policy constituted a transfer of marital assets in contemplation of divorce, which is barred by Minnesota Statute Section 518.58, subdivision 1a. The district court granted summary judgment to Michael’s parents and sister, and an appeal followed.

The Minnesota Court of Appeals affirmed the district court’s decision and held that the statutory prohibition on transferring assets did not apply in this case because there was no dissolution proceeding, as the husband died. The court held that the only remedy available under Section 518.58, subdivision 1a, is one imposed in a dissolution proceeding during the division of marital property. Thus, if one spouse has violated the provision, the court “may impute the entire value of an asset and a fair return on the asset to the party who transferred, encumbered, concealed, or disposed of it” in the dissolution proceeding. But, because Michael was dead, there was no dissolution proceeding available for a remedy. Under Minnesota law, when a party to a marriage dies during the pendency of a dissolution proceeding, the dissolution proceeding is terminated because the marriage, having been ended by death, no longer needs to be dissolved. Thus, when Michael died, his wife was his surviving spouse, and had no dissolution proceeding pending to obtain the requested relief.

The Minnesota Court of Appeals made clear that it frowns on “double-dipping,” namely using rights as a surviving spouse and as a party to a dissolution proceeding. Thus, Kimberlee was limited to her rights as a surviving spouse, and a spouse only vests in life insurance benefits if she is the beneficiary at the time of death.

Spousal Maintenance Extended Because Karon Waiver Was Ineffective without Specific Provisions in the Decree and Judgment

Spousal Maintenance Extended Because Karon Waiver Was Ineffective without Specific Provisions in the Decree and Judgment

In Hietpas v. Reed, A14-0105 (Minn. Ct. App. Dec. 8, 2014), the Minnesota Court of Appeals upheld a district court order modifying spousal maintenance because the judgment and decree did not have a proper Karon waiver. The parties had divorced in May 2008, and the agreement provided for spousal maintenance of $3,650 until Dec. 31, 2012, when maintenance was to end.   The agreement recited that the wife waived future maintenance after Dec. 31, 2012 based on a Karon waiver, the length of the marriage, and her ability to earn sufficient income to support herself and the minor children.

Requirements of a Karon Waiver

Because the courts have no jurisdiction to modify spousal maintenance when the parties execute a Karon waiver, the court first held that the decree did not include a proper Karon waiver.   There are four requirements for a valid Karon waiver:

  1. The stipulation includes a contractual waiver of the parties’ right to modify spousal maintenance.
  2. The stipulation expressly provides that the district court has been divested of jurisdiction over maintenance.
  3. The stipulation is incorporated into the final judgment and decree.
  4. The court has specifically found “that the stipulation is fair and equitable, is supported by consideration described in the findings, and that full disclosure of each party’s financial circumstances has occurred.”

The first two requirements, the contractual waiver and express language regarding jurisdiction, are required to divest the court of jurisdiction. In this case, there was no dispute that the judgment and decree included the contractual waiver; the problem was the absence of specific language in the decree stating that the court was divested of jurisdiction over future motions. Although the hearing on the agreement included testimony by the wife that she understood that the court would not have jurisdiction to entertain a motion to continue maintenance, the judgment and decree did not contain specific language regarding divestiture of jurisdiction or language incorporating the stipulation in court. Further, there were no specific findings that the agreement was fair and equitable. The court held that referencing the Karon waiver in the agreement was not sufficient because the Karon waiver limits the court’s jurisdiction as well as the party’s ability to modify the support order.

The Minnesota Court of Appeals also held that, given the parties’ extended conflict, the court did not abuse its discretion or lose jurisdiction by waiving the requirement that the parties engage in mediation.

Modification of Spousal Maintenance

The Court of Appeals also held that the district court did not abuse its discretion in modifying spousal maintenance. The parties had stipulated at the time of the divorce that the wife would be capable of earning at least $50,000 annually by the time maintenance ceased. The wife was an attorney, and she earned $48,400 in 2012, including eight months of employment in a position that she lost due to insufficient workload, unemployment insurance, and short-term work. She had applied for many jobs and had registered with four employment search organizations. The district court found she did not have the ability to earn the amount contemplated in the judgment and decree because of her difficulty both in finding work and, more significantly, keeping a job. The district court included that her potential annual income at the time of the motion was $32,597.

The Court of Appeals held that the district court did not err in finding that the wife’s mental health problems affected her ability to earn income even though the wife had testified that she lost her high paying job because of a lack of work, not her performance or mental health problem. It concluded that her testimony did not mean that her mental health problems had not prevented her from meeting her job’s billable hours requirement or finding another similar high-paying job.

It found that the wife’s income was more than 20% less than the $50,000 that had been estimated at the time of the divorce, and that amount created a presumption of a substantial change of circumstances, leading to a rebuttable presumption that the existing maintenance award was unfair. It held that the five-year extension of additional maintenance was supported by the record. It held that the district court did not abuse its discretion by failing to consider evidence that the wife had recently been hired for a $52,000 job, as it was not evidence that she would be able to sustain employment, which was her particular problem.

The Court of Appeals held that the district court did abuse its discretion by prohibiting the husband from bringing a motion to modify spousal maintenance for twelve months, as there could be many reasons under Minnesota law, Minnesota Statute Section 518A.39 subd. 2, why a motion to modify spousal maintenance would be appropriate other than a change in the wife’s income, including a change in the husband’s income.

This case illustrates the importance of having good legal advice in crafting an order and judgment dissolving a marriage. If you need a divorce or are considering a motion to modify an order and judgment dissolving a marriage, you may find it useful to consult with an experienced family law attorney.