All posts by Arrigoni Law

Attorneys Fees in Family Law

In a divorce or family law matter it is important to factor in the cost of attorney fees and Court costs in an action when deciding how you wish to proceed. It is foolhardy to not seek legal advice in divorce or family law matters. It is wise to understand it often may be difficult and expensive to obtain a Court order directing your spouse to pay your attorneys fees in the matter.

Under the law a Court can award fees to enable a party to carry on or contest the proceedings, provided it finds:

(1) that the fees are necessary for the good faith assertion of the party’s rights in the action and will not contribute unnecessarily to the length or and expense of the proceedings;

(2) that the party from whom fees, costs, and disbursements are sought has the means to pay them; and

(3) that the party to whom fees, costs, and disbursements are awarded does not have the means to pay them. Minn. Stat.518.14.

A Court can also award fees against a party who unreasonably contributes to the length or expense of the action, or if a party commits fraud, or takes what a Court determines are bad faith actions in a case. Fees and costs can be awarded at any point in the proceeding.

Attorney fees can be obtained when there is a gross disparity in incomes or financial situations in a case, but it often can be expensive and a lengthy process to obtain an award of fees. Sometimes Courts wait until trial after they hear and consider all evidence before deciding an issue involving fees, or make a small temporary award to allow a party to contest the case, but the award often falls far short of the attorney fees required to take the matter through a time-consuming litigation process or trial. It is folly to assume you are going to be awarded every dollar of fees you are incurring, even if there is a disparity in incomes because, in general, Courts are conservative in awarding fees and do not wish to risk encouraging potentially unnecessary litigation. By granting a large temporary award of fees Courts realize this may lead to more litigation rather than a settlement. Generally Courts want matters to settle and not be litigated.  They have very busy Court calendars already and often times ugly divorce litigation is not their favorite way to spend their time.

Instead of counting on or assuming you will be awarded attorney fees the best strategy is to attempt to minimize your own fees because 90% of cases settle short of a trial and it is never easy to negotiate or convince your spouse to voluntarily pay both sides attorney fees.

First carefully review and read your Retainer Agreement with your attorney to understand how you will be billed. Generally numerous phone calls or e-mails to your attorney will lead to a large attorney fee bill quickly. Do not use your attorney as a therapist or as a way to soothe your hurt feelings as it can be very expensive. Find a good friend, or family member, or therapist to talk about your emotional feelings and disappointment. Try to streamline communications to address multiple issues in a single call or e-mail and try not to constantly barrage your attorney with piecemeal information. If possible try to amicably resolve personal property disputes with your spouse without involving your attorney as fees can escalate fast over battles about old TVs or computers or used furniture that have small real current market value.

As hurt as you may be, try to be civil and respectful to your spouse. Personal or verbal attacks may give you temporary satisfaction, but may lead to a barrage of payback attempts to get even or other strategies to punish you in a revengeful manner that will lead to much larger attorney fees for both sides. It can also lead to expensive collateral actions such as Orders for Protection, or Harassment actions, which lead to more fees.  Do not let your emotions drive your actions. Treat your divorce as a business transaction and negotiations, as hard and as cold as that sounds.

Be honest with your attorney and do not hide information or assets. The more your attorney knows the better they can quickly plan how to settle your case. Trying to hide information or assets is unwise and can be deemed fraudulent and that can lead to an attorney fee award and also discredits your credibility with the Court. This can lead to very bad results no matter how good your attorney may be. It can also lead to length discovery requests, or information requests, from your spouse’s attorney, or depositions that lead to much higher attorney fees.

When your attorney requests information or documents, timely get the documents and provide them in an organized fashion. Do not procrastinate in getting information or documents as this leads to follow-up e-mails, letters, or phone calls and more fees and expense. You can save a great deal of expense by carefully organizing the statements, by file folder or clips in order. There are far too many cases where clients bring in a grocery bag of documents accumulated over years that are a mess and take hours to organize and often are incomplete, which again leads to higher fees for a paralegal or staff to try to organize and additional frustration for you.

Keep your children out of the middle of your divorce. Do not attempt to alienate your children against the other parent. If a party feels a parent is undermining a relationship with their children this will lead to anger and hard feelings and more litigation or efforts to get even. It also will cause great emotional harm to your children.

Lastly follow your attorney’s advice. Do not believe you know better or assume you can take shortcuts without seeking the attorney’s input, in particular in negotiating important settlement details, because there may be legal reasons for negotiating a certain way. When in doubt, talk to your attorney, and always before you commit orally, or in writing to any settlement seek your attorney’s input. After you verbally agree to a settlement with your spouse it often can be very difficult to backtrack and negotiate important other matters that may have been forgotten or neglected and this leads to litigation as people get entrenched in verbal promises made along the way.

I know everyone tries to keep their costs down in a Family Law matter, but usually it is more cost effective to discuss your case and the actions that you are considering before you take action, rather than trying to undo it after the fact. It should always be the attorney’s goal to settle your case short of going to trial, which will minimize your own attorney fees because it can be very difficult, time-consuming and cost prohibitive to go through a trial and to attempt to make your spouse pay your attorney fees. Even if the Court does decide to award you attorney fees the Court may only award a small portion of the fees you incurred.

Court Reverses Trial Court Permanent Spousal Maintenance Award And Directs Rehabilitative Maintenance and Also Directs Smaller Monthly Sum

In Spolum v. D’Amato, A14-1335, A14-1720 (Minn. App. August 17, 2015)  the Court of Appeals reversed a Ramsey County  trial court decision awarding Permanent Spousal Maintenance and remanded to the trial court to recalculate Spolum’s  monthly expenses, D’Amato’s income, and to reduce the monthly maintenance award of $14,072 and further held only Rehabilitative Spousal Maintenance was appropriate.

D’Amato, an orthopedic surgeon, and Spolum, a flight attendant, were married in 2001 and had one son, born in 2003. The parties separated in July 2010.  A legal separation action was started and then the parties attempted reconciliation but continued to live separately. A divorce trial began in August 2013. At that time, Spolum was age 49 and D’Amato was age 45.

To plan for the wedding, Spolum took a leave of absence as a flight attendant and extended it after the 911 attack and returned to work 5 years later. She quit in 2006 because her commute was stressful. She is high school educated with some college and art school classes.

Spolum worked at a clothing boutique and as a yoga instructor. When the parties reconciled she opened a chocolate shop, but the business failed. Trial evidence reflected she was “brilliant and creative”.  She was interested in animal-welfare and was on the board of directors for an animal-welfare organization. Spolum desired to establish a career as an animal welfare advocate. A vocational rehabilitation evaluation was completed concluding without additional training she could work in a position earning between $10-$12 an hour, but could attend a two year vocational program.

During the marriage D’Amato was let go in a physician practice. He applied to Health Partners. He was initially rejected, but Spolum testified she invited the head of HealthPartners to their home to advocate for reconsideration and D’Amato was then hired.  D’Amato also began a second job as an independent medical-legal consultant, working approximately 20 hours a week. Near the end of 2011 D’Amato quit the second job as it was time-consuming and stressful causing him anxiety and to be unhealthy. He testified he was already working 50 hours a week at HealthPartners.

D’Amato testified his earning in 2013 would be $800,000 and that he was seeing fewer patients as they were being diverted to other doctors. The Director of HealthPartners testified there has been a decrease in patient volume and surgeries. D’Amato’s income has been decreasing since 2011 and he predicted this trend would continue. He could earn additional income based on his production, but patients were decreasing. D’Amato testified he projected his salary in 2014 to be $750,000. D’Amato proposed the court use his 2013 income of $800,000 and that he pay spousal maintenance for 4 years to allow Spolum to acquire employment and training.

In the Judgment the trial court set D’Amato’s income at $950,538 using a 3 year average and despite finding he had quit his second job to create a more balanced life. The  judge stated that in the event the court overestimated his income D’Amato was in a better position to correct the error by pursuing additional options.

The trial court found Spolum’s discretionary spending at $9,943 per month and then modified that to $8,383 based on D’Amato’s claim this was even higher than she requested. In the original decision the court ordered $18,225 per month in spousal maintenance which was subsequently amended to $14,072 after post-trial motions. Apparently the trial court made findings concerning Spolum’s earning capacity and ability to re-enter the job market, but ignored those facts in making it a permanent maintenance award. The court found she was in good physical and emotional health and found no reason why she could not pursue a successful career because she was healthy, intelligent, articulate, creative, and capable.

The court found permanent spousal maintenance was appropriate based on: (1) the high marital standard of living, (2) the length of the marriage, (3) Spolum will never be able to support herself in the manner close to the marital standard of living, and (4) the fact D’Amato’s income would not decrease. Spolum was awarded $1.2 million dollars in assets, including the Caribbean home “Seacliff” which D’Amato requested be sold and artwork of $110,000, but found the assets were not available until retirement.

The court of appeals reversed the amount and duration of the award and stated Permanent Spousal Maintenance was not warranted and that the award should be Rehabilitative. The court explained a court may award spousal maintenance (1) if a spouse lacks sufficient property, including allocated property to provide for reasonable needs considering the standard of living, or (2) is unable to provide self-support through appropriate employment, in light of the standard of living. Minn Stat. 518.552, subd.1.  In determining an award the court should evaluate (1) the financial resources of the requesting party, including marital property awarded to the party, and the party’s ability to meet needs independently, (2) time necessary to become self-supporting, (3) marital standard of living, (4) duration of marriage, (5) loss of employment benefits and opportunities foregone by requesting party, (6) age, physical condition, and emotional condition of the requesting party, (7) ability of the obligor to meet the needs of both parties, and (8) contribution of each party in the acquisition, preservation, and depreciation of marital property. Minn. Stat. 518.552, subd. 2.

The court stated the trial court put an overriding emphasis on the standard of living, which was merely one factor to be considered. The court did not agree the assets awarded to Spolum were not available until retirement. The court held the evidence and findings support an award of rehabilitative maintenance, not permanent spousal maintenance. The court noted the standard of living was over emphasized because Spolum also testified the standard of living was excessive and unnecessary and was a mistake and was based on D’Amato previously working two jobs and that it was unfair to consider a lifestyle based on income from a prior second job that contributed an average of additional income of $200,00 per year. The court also stated the parties had only lived together as husband and wife for 9 years. It noted prior to the marriage Spolum made $46,000 annually as a flight attendant. The court stated the evidence only supported a rehabilitative award.

The court also stated the trial court failed to consider Spolum’s dubious use of assets during the separation where she transferred $125,000 from the parties’ joint account and only had $40,000 left.

The  court stated the trial court’s finding of the need for discretionary spending of $8,343 per month was excessive. The court also found the trial court clearly erred in finding D’Amato’s income was $950,838 and that spousal maintenance should be based on the obligor’s income at the time of trial. The court noted it was unreasonable for a court to require D’Amato to work a second job in order to satisfy a maintenance award when Spolum is not required to work even one job.

The issue of spousal maintenance is a very difficult matter and requires careful evaluation of numerous factors and often the assistance of experts, including an experienced family law attorney. It is critical to promptly retain an experienced divorce lawyer if spousal maintenance is a potential issue.

Anti-Palimony Statute Does Not Bar Claim For One-Half Interest In Property Listed As Joint-Tenant

In Lendzyk vs.Wrazidlo, A14-1331 (Minn. App .July 13, 2015) the Minnesota Court of Appeals interpreted the Minnesota Anti-Palimony statute in an appeal involving a couple who were dating and commingled money in a new home they built. Boyfriend Lendzyk and girlfriend Wrazidlo began dating in 2006. At that time each owned a home in northern Minnesota. Girlfriend sold home and moved into boyfriend’s home with her two children. They then decided to build a home together. In 2008 girlfriend bought a lot, title to lot was recorded in her name and she financed a construction loan for the home.

After the construction was completed the parties arranged to refinance the construction loan. The loan was refinanced into joint tenancy and both parties signed a mortgage identifying them as joint tenants and girlfriend signed a quit claim deed that conveyed her interest in the property to herself  and boyfriend as joint tenants.

The relationship ended in 2010. In 2012 the boyfriend brought a partition action claiming one-half interest in the property requesting the property be sold and the proceeds be divided between the parties. Testimony was taken that since girlfriend sold her home she would initially buy the lot and pay the majority of the construction costs. After the home was built boyfriend would pay the refinancing cost and then pay for mortgage and insurance. The parties looked at and selected the lot together. Boyfriend testified that the parties agreement was to own the property together, build it together and start a family together. He was going to become more financially involved once he sold his home. Boyfriend paid $10,532 toward closing costs and made monthly mortgage payments and property insurance from 2008 to 2010, which together totaled $77,323. Girlfriend presented evidence she had put $201,171 towards purchasing the property and improvements.

Trial court found anti-palimony statute did not bar boyfriend’s claim to an interest in property and found that as joint tenants, the property should be sold and the proceeds equally divided.

On appeal the court interpreted the anti-palimony statute, Minn. Stat.  513.075, which in part provides that a contract between a man and woman living together out of wedlock is enforceable only if: (1) the contract is written and signed by the parties, and (2) enforcement is sought after termination of their relationship.  Minn. Stat. 513.076 states that unless a contract is executed complying with Minn. Stat. 513.075 a court is without jurisdiction to hear the matter and shall dismiss it as against public policy.

The court appeals affirmed the trial court’s decision citing to two other cases. In, In re Estate of Ericksen, 337 N. W. 2d 671, 674 (Minn. 1983) the supreme court held that even though cohabitants had not signed a contract detailing their financial arrangements regarding a home and it was solely titled in on party’s name, the probate court properly considered an unjust enrichment claim to a one-half interest in home where both parties equally contributed to the purchase and maintaining the home. In another case In re Palmen, 588 N.W. 2d 493 495 (Minn. 1999) two cohabitants agreed to built a log cabin together on a lot owned by Palmen.  After Palmen died cohabitant Schneider claimed an interest in log cabin stating it was agreed if their relationship ended she would be reimbursed her investment for labor and financial contributions to the log cabin’s construction. The trial court denied the claim, but the supreme court reversed holding the anti-palimony statute does not bar the enforcement of unwritten agreements between parties living together if a party can establish the agreement was supported by consideration independent of the couple living together in contemplation of sexual relations out of wedlock and that the party is seeking to protect their own property and is not seeking to claim the property of the cohabitant. The court noted under the facts in the current case the party was seeking to protect his own property and it was supported by independent consideration unrelated to the cohabitation.

Girlfriend also claimed boyfriend’s interest should not be one-half, but limited to the amount of his contributions. The court stated if a property is held as joint tenants there is a presumption of equal property interests. The court found this presumption was not overcome based on the evidence. The trial court found girlfriend’s testimony that boyfriend pressured her to put his name on deed and mortgage was not credible and that the only other evidence presented to rebut the presumption of equal ownership was that girlfriend made greater contributions to the property.  The Court upheld the trial court’s decision to equally divide the sales proceeds in light of lack of other evidence to rebut the presumption.

In any property or relationship dispute it is prudent to seek representation and advice from an experienced family law attorney.

Courts Cannot Retroactively Modify Child Support For Receipt Of Social Security Derivative Benefits Received Prior To Service Of Motion

In, In Re The Matter of Dakota County vs .Gillespie, A13-1240, (Minn. July 22, 2015) the Minnesota Supreme Court addressed, a Child Support Magistrate, District Court and Court of Appeals decisions that granted in part retroactive modification in child support and credit for prior derivative social security paid to the mother commencing in 2012 due to the father retiring due to a disability and him receiving social security disability benefits. At that time mom began receiving a derivative social security benefit for the children in the sum of $1,748 a month, while the father was ordered to pay $1,872 a month. Father sought a reduction because of his reduced income in retirement and the derivative benefits received by mom. Mom moved for an upward departure.

The child support magistrate granted father’s motion ,in part, offsetting the child support obligation by the derivative benefit amount reducing child support to $229 a month and also gave a partial credit for the social security benefits from the time they commenced. The magistrate stated this credit was not a retroactive modification. The magistrate relied on a Minnesota Court of Appeals decision Cty. of Grant v. Koser, 809 N.W. 2d 237, 244 ( Minn. App. 2012), which stated the child support statute did not specify the manner a court must subtract social security benefits from a support obligation, and does not limit applying a credit to either arrears or a current support obligation. The district court and subsequently the Court of Appeals affirmed the majority of the magistrate’s decision.

The Supreme Court accepted review and reversed finding a careful reading of all child support statutes 518A together reflect it is error to grant credit for derivative social security benefits received by the mother prior to when father serves notice of motion to modify. The court stated the court of appeals and the decision in Koser misinterpreted the child  support statutes. The court noted since the statute relative to derivative social security benefits did not expressly provide a post-order mechanism to account for when the benefits commenced, it stands to reason the modification and recalculation is governed by the general modification statute, which precludes retroactive modification prior to service of the motion.

Denial of Spousal Maintenance Not Abuse of Discretion In Considering Investment Income From Property Settlement Sufficient To Meet Monthly Needs

In Curtis v. Curtis, A14-1841, (Minn. Ct. App. June 22, 2015) the Minnesota Court of Appeals affirmed a trial court decision to deny a wife’ request for spousal maintenance, based on imputed income from the reallocation of a property settlement from growth investments to income investments based on an  expert who testified wife could earn 7 percent on her investments if she allocated them from growth funds to income funds. The expert testimony was not rebutted at trial. The court determined the trial court did not abuse its discretion by considering the reallocated investment strategy  and that the investment income was sufficient to meet wife’s monthly needs. The court noted that the reallocation of investments in the property division was not an invasion of assets or improper in light of the expert testimony to support the determinations.

In Curtis the court was faced with a couple who was married in 1990 and separated in 2012 or 2013. Husband worked as a dentist and managed the parties investments. They had two children one was now an adult and a 16 year old son. Wife was awarded the house and investments totaling $2,209,399 or 57 % of the marital estate , while husband received 43% of the estate.  Based on expert testimony the trial court determined wife could reallocate growth funds to income producing funds and meet her reasonable monthly expenses. It was noted the spousal maintenance statute, Minn. Stat. 518.552, subd. 2(a) requires a court to consider financial resources, which include income generated by liquid assets citing to Fink v. Fink, 366 N. W. 2d 340, 342 (Minn. Ct. App. 1985).

The court stated the trial court’s decision did not invade her property award to meet her expenses and was not an abuse of discretion. A dissenting Judge noted the tax consequences of reallocating the assets would be significant and was not considered.The court, however, found the trial court was within its discretion not to consider the tax consequences citing to Maurer v. Maurer, 623 N. W. 2d 604, 608 (Minn. 2001), which found that whether to consider the tax consequences of a property division lies within the trial court’s discretion.

This case raises many potential issues to be carefully considered in spousal maintenance cases and makes it clear it is important to present expert testimony on potential investment income and its impact on cash flow or other important financial issues.

New Custody Law Factors Starting August 1, 2015

After years of debate Minnesota has substantially revised the “best interest factors” to determine Custody under Minnesota Statute 518.17, effective August 1, 2015. There have been meetings and substantial debate since 2012 on how the custody laws should be modified. An important overriding factor considered was to promote the best interests of the child by promoting the child’s healthy growth and development through safe, stable, nurturing relationships between a child and both parents. The factors now emphasize pieces that impact a child’s safety, stability and well-being and nurturing relationships. A shift now more explicitly looks at a child’s relationship with both parents.

The prior law included 13 factors and an additional 4 factors if either party requested joint physical custody. The new law now relies on 12 factors in each case.

1) How does a proposed custody arrangement impact a child’s development and a child’s physical, emotional, cultural, spiritual, and other needs? This is to focus on the child’s needs rather the parental requests as a factor.

2) A court shall consider any special medical, mental health, or educational needs of the child requiring special parenting arrangements. This is a whole new factor.

3) A court shall consider the reasonable preference of the child, if the court determines the child to be of sufficient ability, age, and maturity to express an independent, reliable preference.

4) A court shall determine whether domestic abuse has occurred in the parent’s relationship or household and the implications of the abuse for parenting and the child’s safety, or developmental needs.

5) A court shall also look at whether any  physical, mental or chemical health issue of a parent impacts a child’s safety or development.

6) A court shall consider the history and nature of each parents participation in providing care for the child. Appears to simply the prior primary caretaker factor.

7) A court is to look at the willingness of each parent to care for the child, to meet the child’s developmental, emotional, spiritual, and cultural needs and to maintain consistency and follow through with parenting time.

8) A court shall evaluate the child’s well-being and development of changes to home, school, and community.

9) A court shall evaluate the effect a proposed arrangement on realtionships between the child and each parent, siblings and other significant persons in the child’s life.

10) A court shall determine the benefit to the child in maximizing parenting time with both parents and the detriment in limiting parenting time with either parent.

11) Except when domestic abuse has occurred the court shall evaluate the disposition of both parent’s to support the child’s relationship with the other parent and to encourage and permit frequent contact with the other parent.

12) The willingness and ability of parents to cooperate in raising the child and to maximize sharing information and to minimize exposure to parental conflict as well as utilize methods to resolve disputes on major issues impacting the child.

The law changes are yet to be interpreted, but appear to make major shifts in emphasis on the child’s needs and yet to be broader in focusing on both parents.

In dealing with Custody issues it is always best to retain experienced legal counsel to be fully prepared to artfully advocate your concerns and interests. There are many decisions to made in custody disputes concerning the Process, Experts, Mediators or Litigation, which are best handled with the assistance of knowledgeable legal counsel.

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.

Minnesota Court of Appeals Upholds Denial of Spousal Maintenance Award to Wife Who Is Receiving Disability Benefits

Minnesota Court of Appeals Upholds Denial of Spousal Maintenance Award to Wife Who Is Receiving Disability Benefits

In Rakow v. Rakow, A#14-281 (Minn. Ct. App. (Dec. 8, 2014)(unpublished), the Minnesota Court of Appeals affirmed a district court decision denying current spousal maintenance payments while reserving a future award to a wife who was receiving Social Security disability benefits due to a work-related injury, noting that the district court had awarded the wife a larger share of the couple’s property than the husband received. The couple had been married for ten years when the wife petitioned to dissolve the marriage and asked for permanent spousal maintenance, and they apparently did not have any children.

 

Spousal Support in Minnesota

The Court of Appeals noted that district courts have broad discretion in awarding spousal maintenance. Under Minnesota Statutes Section 518.003, subd. 3a, spousal maintenance “is an award of payments from the future income or earnings of one spouse for the support and maintenance of the other.” Further, under Minnesota Statute Section 518.552, subd. 1, a district court can award spousal maintenance to a spouse if she

  1. lacks sufficient property, including marital property apportioned to the spouse, to provide for reasonable needs of the spouse considering the standard of living established during the marriage, especially, but not limited to a period of training or education, or
  2. is unable to provide adequate self-support, after considering the standard of living established during the marriage and all relevant circumstances, through appropriate employment . . .

That statute, in subdivision B, sets out eight factors that should be considered, along with other relevant factors in awarding spousal maintenance:

  • the resources of the party seeking maintenance, including the property settlement and their ability to meet their needs;
  • the time to complete education and training to become self-sufficient and the likelihood, given the spouse’s age and skills, of becoming full or partially self-sufficient;S
  • the marital standard of living;
  • the length of the marriage and, in the case of a homemaker, the length of absence from employment and the extent to which earning capacity was diminished due to the time out of the workforce;
  • the loss of earnings, seniority, retirement benefits, and other employment opportunities forgone by the spouse seeking spousal maintenance;
  • the age, and the physical and emotional condition of the spouse seeking maintenance
  • the ability of the spouse who is being asked to pay maintenance to meet needs while also meeting the other spouse’s needs; and
  • each party’s contribution to the amount or value of marital property as well as a homemaker’s contribution to furthering the other party’s employment or business.

The Minnesota Court of Appeals found that the district court had adequately considered the relevant factors. In this case, while the wife had not worked at all since August 2012 and her doctor had not been released to work by her doctor, she was planning on back surgery in the next few months which could enable her to return to work. The court noted that she injured her back in a work-related injury and had not lost any income or employment opportunities because of her marriage, and she had worked until her injury.

Further, the court noted that the standard of living during the marriage was beyond the parties’ means, as they had incurred debt to maintain their standard of living, including mortgage debt, loans, and credit card debt.

The court noted that the wife’s monthly income was $1,373 while her monthly expenses totaled $3,108, leaving a deficit of $1,735. In comparison, the husband’s monthly income was $5,108.55 with reasonable monthly expenses of $5,146.68, for a deficit of $38.13. The court did not compare the parties’ post-divorce living expenses or compare them to the parties’ marital standard of living.

The court had taken into consideration the parties’ economic circumstances in crafting the property settlement. Thus, the wife was awarded the entire $14,575 in motor vehicle value and one half of the marital portion of the husband’s pension and his entire employment thrift savings plan, which was more than $20,000, while the husband was to be solely liable for the negative home equity balance, which was close to $70,000.

If the wife is unable to return to work, or she exhausts the property settlement, or her circumstances otherwise change, she would be able to petition for an award of spousal maintenance as the court did reserve the ability to make a future maintenance award.

In any case in which spousal maintenance is an issue, it is useful to consult with an attorney experienced in family law.

Non-Marital Property Becomes Marital Property when Commingled with Marital Property

Be Careful: Non-Marital Property Becomes Marital Property when Commingled with Marital Property

In Wallace v. Wallace, A13-2167 (Oct. 6, 2014), the Minnesota Court of Appeals held that non-marital property in bank accounts became marital property when the funds were commingled with marital property acquired during the marriage.

In this case, the wife asked that funds in a checking account and a savings account be awarded to her as non-marital property. Both accounts had belonged to her before the marriage. However, after she was married, she deposited her wages in the checking account and used the funds in that checking account to pay the couple’s monthly bills. She also made use of the funds in her savings account, by moving funds from the savings account to the checking account when needed to pay bills; she would then repay the savings account with her wages earned during the marriage.

The district court accepted the wife’s argument and awarded her $1,182.27 of the funds in the checking account and $20,076.91 of the funds in the savings account. The husband appealed.

The Minnesota Court of Appeals reversed the district court. The court noted that there is a rebuttable presumption that any property acquired by a married person during the marriage is marital property as well as a presumption that property acquired before the marriage is non-marital property. Minn. Stat. Section 518.003, subd. 3b. When a marriage is dissolved, the non-marital party goes to the party to whom it belongs while the marital party is divided equitably between the parties. Minn. Stat. Section 518.58, subd. 1.

Here, there was no dispute that the spouses commingled the marital property (the wife’s income during the marriage) with the non-marital property that she held before the marriage.   The wife argued that, looking at the balances of the accounts at the start of the marriage, the deposits, withdrawals, and balances at the end of the marriage, the non-marital property could be determined. The court rejected her argument, finding that the only way to maintain the non-marital character of the funds is either to maintain it in a separate account distinct from marital assets or to trace the funds by showing particular items of tangible property that were bought with non-marital funds.

 

How the Court Decided

The court relied on precedents that have held that commingling marital and non-marital funds converts all money in the account into marital property when the account is used for ordinary living expenses and the non-marital funds are not traced to a particular asset.

In order for non-marital assets to remain non-marital assets and belong solely to one spouse, the funds must either be segregated and not used for any marital expenses or must be used to purchase a tangible asset, enabling them to be traced to that asset. Thus, if non-marital assets are used to purchase (in full) a specific item, such as a valuable painting, that painting becomes a non-marital asset. But if the non-marital asset is used for living expenses, then it becomes a marital asset, in the absence of a premarital agreement.

Thus, the court held that all the funds in the accounts were marital property and, therefore, needed to be divided equitably.

In this case, the wife did not file a responsive brief to the Minnesota Court of Appeals. As this case illustrates, even if a party has won at the district court, if the case has been appealed, the party should file a brief in the appellate court. If you have any questions about preserving the non-marital character of your property, you should consult a family law attorney.