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Man goes to jail for refusing to pay ex-wife’s lawyer

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A Genesee Circuit Court judge’s decision to send a Swartz Creek man to jail over a divorce case has been upheld by the State of Michigan Court of Appeals.

According to court documents, the man claimed unemployment for almost two years and that “he has been unable to find employment despite having a mechanical engineering degree from Michigan Tech and an MBA from Harvard” — statements which the court said it found not credible in “an expanding economic environment.”

The kicker may have been when he rolled up to the courthouse in a new car. “I mean, people who are flat broke don’t go buy new cars without showing, in mind, some level of disregard or flaunting their disrespect for court orders, that’s how I see it,” Behm said in court, also addressing that his living situation with his new partner was “essentially, for free.”

Should I move out?

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One of the most common misconceptions is that a person will be found to have “abandoned” their home, by moving out, and that there will be a loss of rights resulting from this action. There is nothing in Michigan law that provides for a loss of rights if one moves out of the marital home. The home continues to be a marital asset and both spouses will be entitled to share in the value of the marital home, subject to other legal principles surrounding the source of the funds that were used to purchase the home.

However, there are considerations that should be made, in deciding whether to move out of your home when a divorce is being considered.

The first consideration is whether there are minor children. If there are minor children, and custody of those children is in dispute, the court may give stronger weight to award temporary custody to the parent who remains in the home. The reason for this is to provide stability for the children. For this reason, it is always preferable to have an agreement, in writing, with your spouse about the care and custody of the children before moving out. There are situations where this is impractical, such as when there are concerns for personal safety, and in those cases, one’s safety must always come first.

Another consideration is whether you and your spouse may both wish to be awarded the right to remain in the house after the divorce.  Again, this has nothing to do with the award of monetary value of the house, but instead comes up if both parties will be asking the court to award physical possession of the home to them at the conclusion of the divorce. Obviously, there is only one house, so if a court has to decide who should be allowed to remain, one consideration is who has remained in the home up to that point. If there are minor children, it is likely that a court will allow the parent who will be the primary custodian of the children to remain in the house if he or she wishes. But in a case where there aren’t minor children, the scale may tip toward the person who has remained in the house.
In the best of worlds, couples should come to an agreement before one moves out, covering how the expenses for the home will be maintained, the servicing of marital debt, whether income will be shared or kept separately, and if there are children, the parenting schedule that will be followed. This allows for both parties to be able to appropriately plan, and to know what can be expected. If reaching such an agreement is not possible, it is advisable to consult with an attorney before moving out, so there is an understanding of the possible ramifications.

EFFECT OF DIVORCE ON PRE-EXISTING WILLS & ESTATE PLANS

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A large percentage of divorced persons, widows, and widowers subsequently remarry one or more times. It is important to consider the legal effect divorces may have on any pre-existing estate plans including wills, trusts, non-probate transfers [such as joint tenancy with rights of survivorship, community property with rights of survivorship, payable on death (“POD”) and transfer on death (“TOD”) beneficiary designations].

What effect does divorce have on a will or trust executed during marriage?

A divorce, by statute, revokes (cancels) any provision in a will executed prior to the divorce directing distribution of any assets to the former spouse (or members of the former spouse=s family) of the divorced person. Likewise, a provision in a revocable trust executed prior to the divorce directing distribution of assets to the former spouse is revoked.

What effect does divorce have on assets where a former spouse was designated during the marriage as a “POD” or “TOD” beneficiary (such as on a bank, credit union account, stock, bond or brokerage account)?

A divorce revokes the beneficiary designation naming the former spouse or any members of the former spouse’s family. It is of critical importance, however, that written notice of the divorce be given to the institution because if the institution delivers the asset to the named beneficiary in good faith and without notice of the divorce, the institution is not liable for having made the distribution to the former spouse.

What effect does divorce have on assets titled during marriage in joint tenancy with rights of survivorship or community property with rights of survivorship with a former spouse?

The divorce terminates the survivorship provision and thereafter the parties own the asset as tenants in common (each owns an undivided equal interest but the death of one of them does not transfer the deceased person’s interest to the survivor). It is essential that there be specific written notice of the divorce recorded in records appropriate to the kind and location of the property. Otherwise, the party making delivery to the former spouse (or family member of the former spouse) or a third party acquiring the property or asset for value without notice is protected from liability.

What effect does divorce have on a designation of a former spouse or member of the former spouse’s family as beneficiary of a life insurance policy?

The beneficiary designation is revoked upon the divorce unless there is some contrary provision in the divorce decree which provides for beneficiary designation or ownership of the policy. As stated above, however, it is critical that written notice of the divorce be given to the insurance company. Otherwise, the insurance company is not liable for payment to the former spouse or member of the former spouse’s family.

So, What Action is Required/Advised upon a Divorce?

It is dangerous to rely upon the statutory provisions discussed in this article instead of having the entire estate plan reviewed and revised during a divorce proceeding. Unintended consequences can occur in spite of the statutory provisions! Upon the filing of a divorce action, there should be consultation with an attorney familiar with the estate plan and appropriate revisions, changes made to any existing will, trust, beneficiary designation, joint ownership of assets. The statutory provisions do not cover all possibilities!

Tax mistakes regarding the alimony rules

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Alimony must be reported as taxable income by the person receiving it. Conversely, it is deductible by the payer (child support is not tax deductible). Unfortunately, many people are unaware that they must pay taxes on the alimony and they are hit with a huge tax bill at the end of the year. Make sure you discuss this issue with you or accountant or tax preparer.

It is possible that a dispute may arise as to how much alimony was paid or received – the amounts claimed on the respective tax returns of the payor or payee might not match. This raises serious red flags with the IRS. Therefore, it is very important to keep good records.

If paying alimony, make sure you keep the following records:

1. Copies of the checks (originals are best). In the memo section, indicate that the check is for alimony and the month that the payment is for.
2. If you pay cash (which is not recommended) make sure you received a signed receipt.
3. A list showing the date, check number, amount and address where payment was made.

If you’re receiving alimony, make sure you keep the following records:

1. Keep a copy of the check received.
2. A list showing the date, check number, amount and bank and account against which the check is drawn on.
3. Copy of any receipts for cash payments.

You can be creative in negotiating settlements by considering the deductibility of alimony payments. Alimony results in tax savings since the higher income individual is able to deduct payments at a high tax rate while the spouse who has little earnings pays taxes at a much lower tax rate. However, it is very important to be aware that certain conditions must be met to make sure that the tax benefits of alimony are not revoked by the IRS. There are several key rules.

1. Paid in Cash. The payments must be paid by check or cash.
2. Written agreement. The payments must be made pursuant to an agreement such as a settlement agreement, court order or divorce judgment. The document should clearly state that the payments are deductible by the payer in taxable to the recipient.
3. Separation. The recipient must live in a separate residence.
4. Termination on death. The payments must terminate on the death of the recipient – this must be stated in the document.
5. No front loading. Alimony cannot be excessively high in the first three years after separation – for example, larger amounts paid in the first year compared to years two and three.

Make sure you negotiate the dependency deduction.

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I marvel at the number of people that do not consider the tax implications of divorce. One important consideration is the dependency deduction for children.   The current tax exemption amount for each dependent child is $3,200. For someone in the 31% tax bracket, this will save him or her over $1000 in taxes. In addition to the dependency exemption, there is also the tax credit which is currently $1,000 for each child under 17. According to the tax code, the parent that is designated as custodial parent (the parent with physical custody) in the divorce decree, is entitled to the dependency exemption. However, the parties can by specific written agreement, provide that the non-custodial parent will be entitled to claim the dependency exemption. Most judges and practitioners believe this is appropriate. If there is only one child, or an odd number of children, the parties can agree to alternate claiming the child as a dependant from year to year. This agreement must be clearly and specifically set forth in the final divorce decree or property settlement.. However, if you don’t ask for it, no one is going to offer to give it to you. Important Tip: Make sure that your attorney includes a clause in the judgment that requires the custodial parent to sign IRS Form 58332 (Release of Claim to Exemption for Child of Divorced or Separated Parents) If there are two children, the parties can agree that each will claim one of the children as a dependent.

There is also a significant tax advantage if you are able to claim head of household tax filing status. In order to claim head of household status, your home must be the principal residence of the minor child for more than half of the year. Make sure that you keep a calendar of the days and nights. Your child spends at your house and at your ex-spouse’s. Then you’ll have documentation, which you can provide to the courts and to the Internal Revenue Service (in relation to the dependency exemption and head of household filing status.). This practice will also help resolve any disputes, you have with your ex-spouse regarding who had children on a particular day.

If you and your spouse have joint custody of the minor children with approximate equal parenting time, you both may be eligible to claim head of household status if the agreement is clear. The language should indicate something to the effect that you and your spouse will arrange your schedules so that each of you will have one of the children for more than half of the year – it could be just one more day (183 days).