Missouri Divorce and Family Law Blog : Kansas City Divorce Lawyer & Attorney : Wortman Law Firm

Recent ruling NC v. CC Missouri Court of Appeals, Eastern District - ED95337    

Husband appeals from the trial court's Amended Judgment and Decree of Dissolution of Marriage dated June 2, 2010, ordering Husband to pay monthly maintenance to Wife and dividing the parties' property and debts. Husband challenges the validity of the trial court's order, and the court's orders regarding maintenance and the division of property and debts.

Decision:

In a dissolution judgment ordering the sale of a marital residence, the judgment must specifically designate how the marital residence will be placed for sale, provide a time frame for selling, and any reasonable conditions upon the sale of the home as the trial court deems necessary. Here, the trial court's order directing the sale of the marital residence failed to set a time frame for the sale. The Court remanded for a new trial as it relates to maintenance, the division of marital property, and the division of marital debts, as the sale of the marital residence affects the division of marital property, maintenance, and debts.

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Since 2005, the Bankruptcy law has been relatively clear that nearly any obligation resulting from a dissolution of marriage proceeding is not dischargeable in bankruptcy, whether that is in the nature of a domestic support obligation (11 USC 523(a)(5)) or a property/debt settlement (11 USC 523 (a)(15).  The Missouri Court of Appeals has reiterated this in a recent ruling.

Recent case: Henderson v. Henderson, No. 98357 (Mo. App. E.D., December 26, 2012)

The parties were divorced in 2010. They entered into an agreement which set forth their respective obligations to pay certain debts of the marriage. Throughout the agreement, there was language that the agreement to pay said debts and hold the other harmless thereon was not dischargeable in bankruptcy. Nevertheless, the ex-husband sought the discharge of his portion of those obligations in a Chapter 7 bankruptcy filing in 2011. His petition for discharge was granted, and the ex-wife had not objected to same in bankruptcy court.

Thereafter, ex-wife filed an action against ex-husband for a contempt citation related to the debts he got discharged. The ex-husband argued that she waived her right to object by failing to file anything in the bankruptcy proceeding. The trial court only required the ex-husband to pay a portion of the debt in question. It determined that only a portion of the debt was in the nature of a domestic obligation non-dischargeable in bankruptcy.

However, it held the ex-husband responsible for a portion of the discharged debt. Both parties appealed.

Held: Reversed.

Under current Chapter 7 bankruptcy law (11 U.S.C. § 523 (a)), “‘all debts owed to a spouse, former spouse, or child of a debtor are non-dischargeable if incurred in the course of a divorce proceeding, notwithstanding the debtor’s ability to pay the debt or the relative benefits and detriments to the parties.’ In re: Tarone, 434 B.R. 41, 48 (Bankr. E.D. N.Y. 2010).”

Thus, a property settlement obligation encompassed by 11 U.S.C. § 523 (a)(15) is non-dischargeable. The trial court erred in finding the debt partially dischargeable.

From the Missouri Bar Courts Bulletin March Edition

Note:  Some debts of this type may be dischargeable in Chapter 13 proceedings.

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Father appeals from the trial court's judgment of November 8, 2011, dissolving his marriage with Mother and entering a child custody and support award for their minor child ("Minor"). The trial court's judgment granted joint physical custody to the parties, with Mother as the residential parent, and ordered Father to pay child support to Mother.

Based on Rule 74.05(d), the Court did not find that the trial court abused its discretion in setting aside the parties' March 4, 2009 default judgment of dissolution because the motion to set aside was filed within one year. Mother presented good cause and a meritorious defense, and Father was not substantially harmed by the trial court's Judgment setting aside the default judgment. Further, due to the trial court's judgment setting aside the default judgment, Father's retirement plan is considered marital property because the parties were restored to their original positions as though the default judgment had never been entered.

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Recent Case: KO vs. MS Missouri Court of Appeals, Western District - WD74673

Wife appeals the judgment of the trial court entering a dissolution decree. In several points on appeal, she challenges the court’s determinations regarding child custody and property division issues.

The Court Held:

(2) the trial court did not err in ordering what school the children are to attend because there was evidence that Husband and Wife were unable to agree on the proper school for the children,

(3) the court’s parenting plan is not erroneous because it gives each parent approximately equal parenting time and allows for the children to have the maximum amount of time possible with their half siblings, and therefore is in the best interests of the children,

(4) the court’s division of the parties disputed bank account was not erroneous because it was in accordance with the premarital agreement,

(5) the court’s division of the parties residences, their respective debt and equity, and the related equalization payment was not reversible error because the difference between its division and that under the proper calculation is de minimis, and

(6) the trial court’s valuation of the furniture in Wife’s possession at the time of dissolution was not erroneous because it was supported by Husband’s credible testimony.

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An action to terminate modifiable maintenance was granted. The case is fact-specific, but deserves reporting simply because of the dearth of appellate cases in which modifiable maintenance is terminated.

At the time of the parties’ divorce (dates not noted in opinion, but approximately 2003-2004), the Husband ran a business which earned him approximately $190,000 annually. The Wife had worked for the business, but that ended with their separation. Her stated needs at divorce were $2,490 per month. She intended to go to school full-time and become self-sufficient thereafter. She requested and obtained $2,000 per month in modifiable maintenance.

Fast forward to 2010 at which time the Wife had graduated from college and gotten a job with the IRS earning approximately $34,000 annually. She had also inherited a half-interest in a piece of real estate worth $63,000 and her residence was paid for and worth $200,000. The Husband filed a motion to terminate the maintenance. His request was granted, and this appeal followed.

Held: Affirmed.  “In determining whether an increase in income renders the prior decree unreasonable, the court may consider a number of factors, including the purpose of the award of maintenance and the current financial needs of the receiving spouse.” Here the Wife’s increased income (from -0- to $3,000 per month), the attainment of her college degree, the acquisition of full-time employment and ownerships of substantial unencumbered assets all indicated her ability to support herself without the need for maintenance. These were reasons sufficient for the trial court to exercise the discretion to conclude the monthly maintenance was now unreasonable.

Source for Post:  Missouri Bar Courts Bulletin October 2012

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Recent Case:  JJ v. EJ Missouri Court of Appeals, Western District - WD74148

Adding a spouse to the title of non-marital property, in this case a farm, transmutes separate non-marital property into marital property. Consequently, when Respondent re-titled the property adding his spouse to the title, the farm became marital property. When the parties placed the property into their trust, the property remained marital property.  

In her third point, Appellant contends that the trial court erred in finding the wedding rings were marital property. The Appellate court agrees because there was no evidence in the record to support that the rings were marital property. The only evidence is Respondent’s testimony that he purchased the rings for Appellant, and an inter vivos gift to a spouse is non-marital property.

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The following post was contributed by guest author Grant Webb, an accounting and accounting law writer for Bisk Education and Villanova University.

Forensic Accountants Fill a Unique Niche

Family law and divorce cases are often quite complex. Depending on the number of family members involved, the amount of assets at stake, and the specific circumstances of the case, even the most experienced attorney might need to acquire additional expertise to achieve the best results for the client. In cases where assets may have been hidden, misrepresented, under-valued or mysteriously liquidated, an experienced forensic accountant may provide the expertise necessary to uncover the facts needed so that the case can move forward in an effective manner.

With the increase in sophisticated technology over the past decade also comes the dawn of more sophisticated investigative power tools. At the same time, people who intend on hiding assets have also become stealthier. When a marriage with significant assets needs to be evaluated for net worth, the assets are often spread across many different areas. Property, businesses, savings accounts, mutual funds, municipal bonds, antiques, jewelry, and recreation items like watercrafts for example are all items that need to be documented and valued. Anticipating the divorce or other family litigation, one of the involved parties may begin to re-title items, sell off or give away valuable possessions to a close friend or relative for later retrieval, and in general hide investments. While the family or divorce attorney is building the case with a general understanding of these facts and other related details, a forensic accountant can usually retrieve highly detailed evidence to make the case stronger. Drawing connections to see the whole picture is a forensic accountant’s fortè. Working together with a family or divorce attorney, a forensic accountant presents a formidable partner on a legal team where financial wrong-doing is an important topic of the investigation.

A complex case requires the expert knowledge of professionals who can secure the best possible outcome for a client. Hiring an attorney who is accustomed to bringing in and working effectively with other expert professionals such as a forensic accountant could mean a more favorable outcome. While cost is always a concern when pursuing legal solutions to disputes, many settlements or court decisions will have long-lasting effects on family members so it is important to be as effective and thorough a possible as the case proceeds. A Certified Forensic Accountant offers a unique skill set to the legal professional and can help provide the experience necessary to help secure critical financial evidence. When choosing a family or divorce attorney to help resolve a complicated dispute, savvy clients make sure that they can keep the option open to bring in other experts, like a forensic accountant or CPA, in order to secure the best outcome possible despite stressful circumstances. There are countless justifications for hiring legal representation of this type but for clients that may not know the upside to hiring a forensic accountant or even know how to hire the right CPA, it's always a good practice to interview or even research these industry professionals to determine the best hire or fit for a client’s needs.

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Value of a closely-held corporation must be as fair market value and application of a calculation of value via a buy-sell agreement not related to fair market value is error. Wood v. Wood, No. 96218 (Mo. App. W.D., November 29, 2011), Romines, J.

This was an appeal from a dissolution of marriage action. The Husband appealed the decision on several grounds, but it comes down to his challenge of the valuation of his 30% interest in a closely-held corporation. Both parties had an expert testify as to the value. Wife’s expert testified as to value based upon a buy-sell agreement formula that existed between the shareholders. Husband’s expert testified as to his opinion of the fair market value thereof. The trial court concluded that the Wife’s expert had properly assessed value $1.062 million versus $325,000 by Husband’s expert.

Held: Reversed. “Wife’s calculation failed to comply with [the rule that fair market value at time of trial is required because Wife’s expert] does not seek a fair market value or fair market value of [Husband’s interest in corporation.]”

“Furthermore, the formula does not even employ a current appraisal of [Husband’s interest in corporation.] As part of the calculation of present share value, and instead uses the historical value of company in 2007 at $3,000,000 as the starting point.”

“[W]here an expert’s testimony does not attempt to determine fair market value, the trial court simply cannot find it more persuasive and credible than another and rely on such testimony in valuing those shares.”

Dissent: The dissent is based upon the technical failure of the Husband’s point relied on to preserve the issue for review on the basis found to be dispositive by the majority opinion. Consequently, the dissent would deem the claimed error not reviewable.

Source For Post:  Missouri Bar December Edition of Courts Bulletin - Mobar.org

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Administrative child support orders are available for the support of all eligible children, including children of citizens of other countries. Lajeunesse v. State of Missouri Department of Social Services, No. 73477 (Mo. App. W.D., October 4, 2011), Martin, J.

A child was born to a Russian citizen in West Virginia. Father was a Missouri resident and a support order was sought for the child through the Department of Social Services (DSS), which established paternity and Father’s financial responsibility for support. Mother and child now live in Russia. The Father filed a petition for judicial review and the trial court found that Department of Social Services was without jurisdiction to enter an administrative order requiring Father to pay child support. Upon Father’s motion the trial court overturned the administrative order. DSS appealed.

Held: Reversed. “. . . Father argues that unless a recipient is a resident of the State of Missouri or another state, the recipient is not eligible for child support services.”

The applicable sections of the statutes, § 454.425 and 454.400, do not provide for child support relief for only United States residents. “By its plain terms, § 454.400.2(14) is broad, requiring child support services to be provided to any other child for whom services are applied. This is in keeping with § 454.425, which also broadly permits services to be provided to all children, custodial parents, and persons entitled to receive support. A harmonious reading of § 454.425 and 454.400.2(14) indicates that the legislature intended to authorize and require DSS to provide services to any child for whom services are applied. This broad and unrestricted directive is not, by its terms or by implication, limited to residents (or citizens) of the United States.”

An agreement that maintenance will terminate “only” upon death excludes application of § 452.370 for termination of maintenance upon remarriage. Simpson v. Simpson, No. 91498 (Mo. banc, October 4, 2011), Fischer, J.

The parties were divorced in 2005. They entered into an agreement by which the Husband would pay the Wife $12,000 per month in non-modifiable maintenance for 15 years. Said maintenance was to “terminate prior to the expiration of said 15 year period only in the event of the death of either party.” In 2009, the Wife remarried. The Husband filed a motion to terminate maintenance on the basis of her remarriage. The Wife responded by filing a motion to dismiss his claim, which was granted. The Husband appealed, and the matter ended up in the Missouri Supreme Court to address the applicability of § 452.370.3, RSMo, that provides that maintenance terminates immediately upon Wife’s remarriage unless otherwise agreed in writing or expressly provided in the judgment.

Held: Affirmed. “The problem with the Husband’s argument is that he and Wife agreed in writing in the separation agreement that maintenance would terminate ‘only in the event of the death of either party.”

“[T]he use of the word ‘only’ in the separation agreement is sufficient to overcome the statutory presumption of § 452.370…”

Generally, retained earnings of closely-held corporation are corporate assets and not marital property and distributions to liquidate corporation in exchange for non-marital stock are not marital property. Short v. Short, No. 95663 (Mo. App. E.D., October 25, 2011), Sullivan, J.

This was an action for dissolution of marriage in which the parties had a prenuptial agreement. The meaning of the agreements terms were in dispute, especially regarding whether it provided that earnings derived from separate property had been excluded from marital property. Both parties appealed. As a side note, it is interesting that the parties met four days before the wedding to discuss the terms of the prenuptial agreement in detail. A draft of the agreement was first presented to the unrepresented Husband the day before the wedding. The trial court’s determination that the agreement should be upheld as valid was affirmed despite the short amount of time noted herein.

The trial court found that the agreement did not expressly exclude as non-marital property the income earned from that non-marital property during the marriage. During the marriage the Wife received several million dollars in liquidating distributions in exchange for cancellation of her non-marital stock interest in a closely-held corporation. The trial court found those distributions to be marital property.

Held: Reversed in part as to the character of the corporate liquidation payments in exchange for non-marital stock. “Evidence presented at trial showed that approximately 97% of (corporation’s) assets at the time of (corporation’s) liquidation were comprised of …̔ retained earnings.’ Generally, retained earnings of a corporation do not constitute marital property. Hoffmann v. Hoffmann, 676 S.W.2d 817, 827(Mo. banc 1984); Craig-Garner v. Garner, 77 S.W.3d 34, 38 (Mo. App. E.D. 2002). Retained earnings and profits of a corporation are a corporate asset and remain the corporation’s property until severed from other corporate assets and distributed as dividend. Hoffmann v. Hoffmann, at 827; Craig-Garner v. Garner, at 38.”

Moreover, “[t]he money Wife received as liquidating distributions from the dissolution of (corporation) was not income earned by her separate stock; rather, it was liquidated capital distributions received in exchange for, and in cancellation, of her stock in (corporation), which was her separate property.”

Source for Post:  November issue of Courts Bulletin.  A publication of the Missouri Bar

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www.courts.mo.gov/file.jspMissouri Constitution provides subject matter jurisdiction of circuit courts. The Uniform Child Custody Jurisdiction Act provides comity among states and determines which state is the most appropriate forum for seeking remedy. The Circuit court should make findings under those provisions. Rule and statute describe minimum contacts necessary to make a person subject to circuit court jurisdiction. Under those provisions, “liv[ing] in lawful marriage within” Missouri is more than passing through while traveling and appearances to enforce foreign orders. “It is not necessary to stand on your jurisdictional challenges and refuse to participate in the proceedings to preserve your objections to jurisdiction.” Circuit court lacked personal jurisdiction to render appellant liable for child support and marital debts.

The Court held as follows:

(1)The circuit court erred in asserting personal jurisdiction over wife because she and Husband never lived in lawful marriage in the State of Missouri. The circuit court lacked jurisdiction to subject her to an in personam judgment for child support and division of marital property (not within the State). The circuit court, therefore, erred in ordering Wife to pay child support in the amount of $278.00 per month and to pay certain marital debts. The circuit court did, however, have jurisdiction over the status of the marriage and could dissolve it.

(2) The Circuit Court of Clay County had the authority to make the child custody determination in this case under the UCCJA. The record established that the only other state that would have jurisdiction over this matter refused to assert jurisdiction and declined to exercise jurisdiction because Missouri was the more appropriate forum.

(3) The factual record established that the circuit court had the authority to proceed under the UCCJA and to determine the child custody issue. Case remanded to Circuit Court for further proceedings

The entire opinion can be read here

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Under Missouri Law, certain property is considered to be non-marital, and not part of the division of the marital estate in a divorce proceeding.  Non-marital property includes property:

1. Acquired before the marriage;
2. Acquired by gift or inheritance;
3. Acquired in exchange for property acquired by 1 and 2 above;
4. Acquired after a decree of legal separation;
5. excluded by written agreement (pre or post nup)

In the case of an increase in value of a non-marital asset described above, the general rule is that the increase in value is also non-marital.  The exception to the rule occurs when marital assets, including labor or marital income, contribute to the increase in value.  The Court of Appeals has said that marital effort, labor , or services, will entitle a spouse to a proportionate share of the increase in value of the separate property, but only after "comprehensive substantiation", including proof of:

1. a contribution of substantial services;
2. a direct correlation between those services and the increase in value;
3. the amount of the increase in value;
4. performance of services during the marriage; and
5. the value of the services, the lack of compensation, or inadequate compensation received.

There must more than just services provided, but a connection between valuable services provided and the increase in value of the asset.  Note that income received during the marriage by either spouse is considered a marital asset, so if any income of either spouse is contributed to the asset, it is considered a marital contribution.  Likewise, in terms of a non-marital business, employment or labor for no or reduced salary is also considered a marital contribution.

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The Circuit Court does not have authority to divide assets that are not owned by either spouse in a dissolution of marriage.  In a recent Missouri case, the trial court entered a judgment that divided certain trusts where the children were the sole beneficiaries.  Since the parties to the case did not have any interest in these assets (as they belonged to the children), the Court could not make any division.  The same would also hold true for property titled in the children's (or another persons) name, such as a vehicle or bank account. 

To view this recent opinion, click here.

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While Missouri courts normally follow the “American Rule” regarding legal fees – that each party is responsible for his or her own costs – Missouri dissolution of Marriage statutes give the court the discretion to order one party to contribute to the other party’s fees. Specifically, Section 452.355.1 provides:

Unless otherwise indicated, the court from time to time after considering all relevant factors including the financial resources of both parties, the merits of the case and the actions of the parties during the pendency of the action, may order a party to pay a reasonable amount for the cost to the other party of maintaining or defending any proceeding pursuant to sections 452.300 to 452.415 and for attorney's fees, including sums for legal services rendered and costs incurred prior to the commencement of the proceeding and after entry of a final judgment. The court may order that the amount be paid directly to the attorney, who may enforce the order in the attorney's name.

The court is always required to consider the financial resources of each party before deciding on a request for attorney’s fees.  While the court must consider the financial resources of each party, a spouse is not required to forego a claim for attorney's fees merely because assets on hand are available to make payment.

In most cases, attorney fees are not an issue, and usually judges are reluctant to award attorney fees. However, when the issue does arise, the conduct of the parties during the litigation and how the judge perceives the parties are usually just as important as financial resources in determining the award.

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Similar to other states, Missouri is a modified no-fault divorce state. However, there is some misconception out there about what this actually means for divorcing parties in Missouri. Modified no-fault divorce means that a party does not have to prove that their spouse committed some kind of misconduct, such as adultery, abandonment, financial, etc., in order for the court to grant the divorce. All that has to be proven, with regards to grounds, is that there is “no reasonable likelihood that the marriage can be preserved, and that the marriage is irretrievably broken”, which is basically the familiar “irreconcilable differences”.  If that is proven, or as is often the case, agreed to in the filings, the court will grant the divorce (assuming jurisdictional and procedural requirements are also met). 

However, no fault does not mean that conduct is not relevant.  Although conduct does not need to be proven to actually get the divorce, conduct, or misconduct, can have a bearing on all aspects of the case.   Conduct can affect how the court divides the property, awards spousal maintenance, awards attorney’s fees, awards custody, parenting time, and to some extent child support. Although there is usually a preference for joint custody and equal property division, “no fault” does not mean that that will be the case, and “no-fault” does not mean that everything will end up equal.  The court has to look at other standards for each particular issue in the case, and will make orders accordingly as to those issues.

It is also not required that a spouse “grant” the other spouse the divorce, however it is possible that a party could try to prove that the marriage was not actually broken and could be preserved. My thought is that if spouses are actually to the point of litigating in court, the court is probably going to find that the marriage is broken. So, modified no fault may in reality mean actual no fault, but there is still that standard of proof in all cases.

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In a recent ruling by the Missouri Court of Appeals for the Southern District, a division of property and debt where the Wife received 93% of the assets and 27% of the debts, and the Husband received 7% of the assets and 73% of the debt was reversed and remanded to the trial court for further proceedings.

It is typical in a majority of cases for the trial court to divide property and debt equally. However, the Court is not required to follow a rigid formula for property division and is not required to divide the property equally. The division must be “fair and equitable” to the parties. This means that the court has a great deal of discretion when dividing property and debts, but there must be sufficient evidence to support a disproportionate division as being fair and equitable. In determining the property division, the court must consider the economic circumstances of the parties, contributions during the marriage, the value of non-marital property, conduct during the marriage, the custodial arrangement for the children, and other factors.

In the recent case, the Court looked primarily at the conduct during the marriage, and the trial court had found that physical abuse and verbal threats had occurred which supported the disproportionate division. However, there must be evidence to show the additional financial, emotional, or other burdens placed on the aggrieved spouse due to the conduct. It is not appropriate to “punish” a spouse’s marital conduct by way of disproportionate property division, and conduct is the only factor that must be considered.

In this case, there was evidence of the misconduct, but no evidence as to how it caused additional burdens or stress on the other spouse or the marriage, financial or otherwise to support the grossly disproportionate division. The case was remanded to the trial court for further proceedings to make those findings.

SD29991-  Missouri Court of Appeals for the Southern District of Missouri

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In a recent decision by the Supreme Court of Missouri, the Court held that a spouses contribution to otherwise separate property creates a marital interest that can be divided by the Court.  In Missouri, property that was owned prior to the marriage is generally considered to be separate, non-marital property.  Separate property is awarded to the spouse who owns the property, and marital property is divided by the court in some ratio, very commonly 50/50.  There are exceptions to this rule of course, including, but not limited to, source of funds, transmutation, and marital contributions.

In the recent decision, one spouse owned a business with a value of $20,000 at the time of the marriage, and during the course of the marriage the value of the business increased to around $500,000.  The other spouse never had legal title or a legal interest in the business, but made contributions to the business, including reducing a substantial amount of debt, acting as a guarantor and corporate officer, conducting all bookkeeping and corporate banking, managing the office, introducing new products, making capital improvements, and working as an employee. 

The trial court found that these contributions created a marital interest in the property, and the Supreme Court agreed and affirmed the equal division of the equity in the business under the rationale that marital labor, effort, or services result in a marital interest in the increased value of a spouse's separate property if there is proof of: (1) a contribution of substantial services; (2) a direct correlation between those services and the increase in value; (3) the amount of the increase in value; (4) performance of the services during the marriage; and (5) the value of the services, the lack of compensation, or inadequate compensation. 

The court found that all these requirements were met and upheld the decision of the trial court.  The full opinion can be read here.

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As a practicing family and bankruptcy attorney, I consistently run into cases where people are dealing with both a divorce (or other family law related matter), as well as a bankruptcy.  This is because, many times, one is the cause of the other (this works both ways), and the cases often go hand in hand. That is probably no surprise considering the current economic climate, and if this applies to you, believe me, you are far from alone. Check out the numbers:  

Bankruptcy filings in the federal courts rose 31.9 percent in calendar year 2009, according to data released by the Administrative Office of the U.S. Courts. The number of bankruptcies filed in the twelve-month period ending December 31, 2009, totaled 1,473,675, up from 1,117,641 bankruptcies filed in 2008.

Filings have grown steadily since 2006, when bankruptcy filings totaled 617,660, in the first full 12-month period after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. An historic high in the number of bankruptcy filings was seen in 2005, when over 2 million bankruptcies were filed just before BAPCPA took effect.

Filings by Chapter
In 2009, filings rose under Chapters 7, 11, 12 and 13 of the U.S. bankruptcy code.

·       Chapter 7 filings totaled 1,050,832 up 41 percent from the 744,364, Chapter 7 filings reported in 2008.

·       Chapter 11 filings rose 50 percent to 15,189, up from the 10,147 filings in 2008.

·       Chapter 13 filings were 406,962, up 12 percent from the 362,705 filings in 2008.

·       Chapter 12 filings totaled 544, up 58 percent in 2009, compared to 345 Chapter 12 bankruptcy filings in CY 2008.

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I can’t think of how many times that I have had a client tell me, regardless of what the issue is that is in dispute, that the opposing party is “just worried about money” or that it is “all about the money” for him or her, and that is their sole motivation in the case. Or maybe it is the other way around. My usual response is “isn’t it always?” There are so many financial aspects of divorce that have to be balanced that if parties aren’t careful, they can end up in a big money mess. Here are a few of the big ones:

1.       2 households instead of one: Before a couple or family divorces, they live in one residence with one set of bills and expenses, paid by however much money the couple/parents bring in. Upon divorce, the same level of income still exists, but now there are two mortgages/rent, two sets of utilities, two sets of grocery bills, two car payments, relocation expenses, first and last month’s rent, and so on. Basically, double or so the expenses on the same income.  It is not hard to see how difficult this is in and of itself.

2.       Debts. These days, many families are just a paycheck or two away from real trouble with credit cards and other unsecured debts, and if there are significant debts involved in the divorce, a real challenge exists. Sure the court can divide the debts and assign liability to each spouse, but it doesn’t do much good if the net marital estate is significantly reduced or eliminated by the debt. A divorce is a separation of financial livelihoods, and when possible, it is a good idea to use assets in the marital estate to reduce or eliminate debt before dividing assets. The less debt after the divorce the better for both parties, even if on paper one spouse is supposed to be responsible for it. It is a future fight or bankruptcy filing waiting to happen.

3.       Child Support: Quite simply, nobody is happy with it. If you have to pay it, it is going to be perceived to be too much, and if you are receiving it, it is perceived to not be enough.  In Missouri child support is largely a mathematical calculation based on incomes and other expenses, and to some degree it is what it is.   But regardless, it another factor affecting the same level of income pre-divorce, and it will never make a party “whole” or maintain a pre-divorce standard of living.

4.       Maintenance: Although there is no mathematical formula the same holds true as does for child support, it is probably both too much and not enough,  and it is still going to have to come out of the same pot of money.  Unless the parties are very well off financially to begin with, to expect the same standard of living pre-divorce is usually unrealistic. Although appropriate in some cases of long marriage, large disparities in income, or other factors, maintenance in Missouri is awarded in a small percentage of cases.

5.       Health Insurance: Regardless of your politics on the issue, health insurance is expensive and upon divorce usually a former spouse cannot remain on the other spouse’s health insurance. So, unless both parties can get affordable health insurance, if such a thing exists, then this can be a big financial factor that likely may only have a handful of undesirable solutions.

6.       Attorney fees and case costs: On top of all of this, the divorce is a direct expense in terms of attorney fees and costs associated with the case. If the case is contested, then the total cost on the family is the sum of both spouses total investment in the case. Attorney fees are not usually awarded, which is all the more reason to try to approach the case in an informed and rational way, and try to keep costs and conflict down. The higher the conflict, the higher the cost every single time.

There are of course, other issues particular to certain cases, but regardless of how extensive the list may be, the bottom line is that divorcing spouses need to be smart and rational about how to separate financially and view their situation in a realistic way. Otherwise,  financial disaster in one form or another, certainly awaits.

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In a recent ruling by the Missouri Court of Appeals, the court upheld a trial court ruling where marital assets were divided unequally between the spouses, the division included money spent by a spouse after separation, and spousal maintenance was awarded even though the spouse receiving the maintenance also received the larger portion of the marital property.

On the issue of division and the characterization of the property, the court held that the question of whether property is marital property is, among other things, one of credibility. The trial court is given due regard to the determination of credibility of witnesses and the trial judge is free to believe all, part, or none of the testimony of any witness. The trial judge may disbelieve testimony adduced by a witness even if the testimony is not contradicted.  In this recent case, even though the Husband testified that he thought the property in question was a non-marital asset, all other evidence indicated that it was jointly owned by the parties as marital property.

On the issue of marital assets spent by one spouse after separation but before the dissolution of marriage, the court held that the “spending party” can be ordered to reimburse the other spouse through disproportionate property division. In this case, the issue was one or more retirement accounts that the Husband claimed that he “lived on” during the separation, although his salary was sufficient to cover all of his living expenses. The court held that the trial court does not have to specifically find that it believes monies have actually been secreted or squandered in anticipation of divorce, because its actions can imply such a conclusion where sufficient evidence exists to support that conclusion. The court also, even after the reimbursement of the “spent” money and attorney fees, upheld the award of maintenance.   The court said that, even though there was an award of substantial marital assets that the Husband claimed could support the wife, the wife was not required to deplete, or “live off” of those of marital assets before maintenance can be awarded or take effect.

The full text of the opinion can be read here. 

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In a divorce proceeding, a personal injury settlement can be a major asset that will have to be divided between the parties. Missouri uses the "analytical" approach to determine whether the settlement proceeds are marital, non-marital, or both.

In a marriage dissolution proceeding, the trial court uses a two-step process for dividing property. The trial court must first set aside non-marital property before it divides marital property “in such proportions as [it] deems just.” Property acquired during the marriage is presumed to be marital, but the presumption may be overcome. A settlement for a personal injury claim occurring during the marriage may be both marital and non-marital.

To determine whether funds from a personal injury settlement are marital or non-marital, Missouri uses the “analytical” approach. Under this approach, also known as “replacement analysis,” the settlement award is classified by what it is meant to replace. To determine the intent of a settlement, a court may look to what the parties would have received if the claims had been adjudicated.  If the award is to compensate for separate, non-marital losses, it is non-marital property; to the extent it compensates for marital losses, it is marital property.

Under the analytical approach, compensation for loss of future, post-dissolution wages is non-marital property, while compensation for wages lost during the marriage is marital. Similarly, compensation for post-dissolution medical expenses is generally considered non-marital, while compensation for medical expenses during the marriage is generally marital.. Compensation for non-economic damages, such as “pain, suffering, disfigurement, disability, and loss of ability to lead a normal life” is generally considered the separate property of the injured spouse.

The Court of Appeals recently held that the trial court did not err in determining that post-dissolution payments due under the settlement agreement were properly characterized as non-marital property. To see the opinion, click here.

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The Missouri Court of Appeals for the Southern District of Missouri has just recently upheld the Missouri exemption (protection from creditors) for Tenancy by the Entirety for jointly owned property by married couples.

Tenancy by the Entireties is a special form of property ownership that Missouri, and some other states, reserved for married couples only. Tenancy by the Entireties means that a husband and wife own property as one person, and each of them owns a 100% interest in the property.  This is different than co-tenancy, where each owner only owns their respective interest in the property (such as when two unmarried people own property – they each own only their half).

It is presumed that jointly owned property by married couples is tenancy by the entirety, and the presumption can only be rebutted by evidence that there was consent, agreement, or acquiescence that the property was not owned in this way. Tenancy by the Entirety property is fully exempt from creditors of one spouse, and is exempt in bankruptcy provided that only one spouse is filing. If both spouses file bankruptcy, the exemption does not apply, and if a creditor trying to collect a judgment is a creditor of both spouses, the exemption does not apply.

In the recent ruling, a creditor had obtained a judgment in another state, registered it in Missouri, and attempted to collect the debt by seizing assets (known as execution) that were jointly owned by a married couple. The Court held that, even though there was some evidence that the property was only owned by one spouse, it was not enough to rebut the presumption of tenancy by the entirety, and the property was exempt from collection.

To read the full opinion click here.

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With so many people facing bankruptcy in the current climate, it may be good news to know (depending on which side you are on, of course) that the bankruptcy does not allow a person owing a domestic support obligation to use bankruptcy as a way to avoid payment of the debt. In fact, virtually any obligation that is domestic in nature cannot be discharged in bankruptcy. Here are a few facts:

• A domestic support obligation is not dischargeable in a Chapter 7 or Chapter 13 consumer bankruptcy proceeding. 
• “Domestic Support Obligation” is a debt that is owed to or recoverable by a spouse, ex-spouse, or child of the debtor or their guardian or representative, or a governmental unit (such as the Children’s division or the Court). This includes alimony, maintenance, child support, state assistance, even if the debt is not titled exactly in that manner. Also included is a debt arising out of a separation agreement, divorce decree, or property settlement agreement.
• Also non-dischargeable in a Chapter 7 is any debt to a spouse, former spouse, or child not described above that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree, or other order of a court of record. Any debt that falling under this section may be dischargeable in a Chapter 13 debt adjustment, however.
• Domestic Support Obligations receive the number 1 priority for repayment in a Chapter 13 plan or when funds are available in a Chapter 7 bankruptcy estate.
• To summarize, if it is domestic in nature, it is going to have to be paid. This includes not only child support or maintenance, but also property and debt divisions, such as: marital estate equalization payments, payments in settlement, qualified domestic relations orders, contempt payments, divisions of debts, vehicle debts, mortgages, credit cards, lines of credit, personal loans, medical insurance, costs for non-covered medical care, retirement plan divisions, military retirement divisions, attorney fee awards, and the kitchen sink.
• No special language is necessary in the divorce settlement or decree to make these provisions apply, although it may be a good idea just to drive the point home.

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In this time of economic downturn, I am seeing quite a few people filing for divorce who have substantial debt problems, and many are considering, or needing, to file for bankruptcy. This is especially true considering that a large number of those considering divorce are doing so because of financial struggles. In this event, careful planning is required and each individual situation must be examined thoroughly. Below are some points to consider, not intended to advocate bankruptcy by any means, but just for general information on a situation that is very common.

If you can avoid bankruptcy, that is the best option. However, if required, it may be better to file bankruptcy before the divorce, considering:

• Missouri and Federal bankruptcy law will allow married couples to file jointly, eliminating the need for two separate bankruptcy filings and two separate attorney fees after the divorce.
• The parties can exempt (protect) double the amount of property if they file jointly
• Most married couples have joint debt.  Even though the divorce court can divide the debt, it cannot alter the contract with the creditor, meaning that if the spouse ordered to pay doesn’t, creditors are going to come after whoever’s name is on the account.  Then the only remedy is a contempt of court proceeding, which is time consuming (up to a year) and costly. All the while, the other spouse has to make the payment or suffer the credit consequences. Joint bankruptcy can eliminate the debt all together and avoid the problem of who pays who.
• Joint filing before the divorce will eliminate the need to litigate issue of debt in the divorce, which reduces the time and expense of the divorce, and avoids the result described above. Remember, a divorce decree is just a piece of paper, enforcing it is a whole different matter.
• Although the bankruptcy law will not allow a divorcee to discharge debts ordered in the divorce, the problem of collection and contempt may cause greater credit problems than the bankruptcy itself.
• Joint filing before divorce will allow for a higher income threshold for Chapter 7 qualification (means test avoidance)
• Joint filers can utilize Missouri’s double wild card exemption and the head of household exemptions with child exemptions (which can be significant).
• It most likely (almost guaranteed) that you can rebuild and re-establish your credit much faster than you could ever have paid off the debt, while at the same time getting the past problems behind you and truly getting a “fresh start”.
• Bankruptcy is not the end of the world. It can be an effective solution to a real problem that real people have during these times.

Please note that this list is not complete, and other issues may affect the analysis or timing of the filing. Seek legal advice for your particular situation.

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Discussed below is a recent ruling from the Western District of Missouri, where the Court, among other things, upheld the trial Court's ruling of imputation of income for child support and the award of attorney's fees. 

For calculation of child support, a trial court may impute income to a party according to what that party could earn by using best efforts to gain employment suitable to his or her capabilities.   Imputation is appropriate where the parent voluntarily reduces his or her income without justification. Further, Imputation is only proper where the trial court concludes from the evidence that the "parent has the capacity to earn more but voluntarily refuses to do so."  In imputing income, the directions to Form 14 indicate that the court may consider employment potential and probable earnings level based on the parent's recent work history, occupational qualifications, prevailing job opportunities in the community. 

As to the issue of attorneys fees, Missouri law permits the Court to award attorney's fees to a party, but it is not required to do so.  Generally the Court takes the position that each party must bear their own costs of litigation, and usually does not require one party to pay the attorney's fees of another party.  However, if the court does make such an award, the Court must consider all relevant factors including, the relative financial resources of the parties, the merits of the case, and the actions of the parties during the pendancy of the action.  In this recent case, the Court of Appeals stated in so many words that an award of attorney's fees would not be reversed if the award was arbitrary and unreasonable.

The summary of the case is as follows:

Circuit Court Need Not Award All Attorney Fees
Child's best interest does not necessarily require that Spouse who was caregiver during marriage has more parenting time after dissolution. Circuit Court properly imputed income to Spouse based on evidence of earning potential and desire not to achieve it. Actual income includes bonuses and benefits. In property division, Circuit Court need not credit Spouse with separate debts, including attorney fees, and need not award fees where much was spent litigating meritless issue. Payment of past maintenance did not waive contest of future payments, but Spouse did not show that the amount "was unwarranted, beyond [Spouse's] means to pay or so excessive as to constitute an abuse of . . . discretion. Rule allows award of half of transcript costs.
Sharlene Krepps, Appellant-Respondent, v. Richard Lee Krepps, Respondent-Appellant. Missouri Court of Appeals Western District

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The following article was recently published by Jimmy Atkinson on his blog Ask the Advisor.  This article addresses a very important issue in a dissolution of marriage proceeding, the division of debt.  If not done properly or completely, outstanding debts can cause disasterous consequences to a sometimes innocent party.  The fact is, a Court can order a party to a divorce to pay a certain debt, but the court cannot alter the relationship of the parties with their creditors.  This means that, for example, if Husband and Wife are jointly on a credit card account, and the court orders Wife to pay the debt, if Wife does not pay,  the creditor can and likely will still come after husband for payment.  It is then up to Husband to pay the debt and try to recover the money from Wife in an enforcement or contempt proceeding.  This is a costly and time consuming process that can be avoided with proper planning, and this is why It is important to remove names or transfer debts into the name of the person who is obligated to pay prior to the divorce. 

The article contains additional infomation and is reproduced in its entirety below

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Pension Was Marital And Non-Marital Property
Pension is a hybrid of marital and non-marital property; the former to the extent that it represents deferred payment of wages earned during the marriage, and the latter to the extent that it represents compensation for future wages lost due to disability. Remanded to Circuit Court to reconsider property and debt division, and maintenance awards.
Sandra Ray Coffman, Respondent v. Elvin Cale Coffman, Appellant. Missouri Court of Appeals Western District

Separable Finality Did Not Apply
When a party to an action for dissolution of marriage dies, action continues if Circuit Court has already dissolved marriage "even though the order may be partial, interlocutory or not a final judgment resolving all issues in the case." But action abates if Circuit Court has not already made some order purporting to dissolve the marriage. Order nunc pro tunc cannot correct that omission.
Mary Ruth McMilian, Appellant, v. James Henry McMilian, Respondent. Missouri Court of Appeals Western District

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Conduct During Marriage Influences Judgment
Wife's inability to support herself due to health problems and lack of skills supports award of maintenance. Evidence of Wife's resources, from later hearing on attorney fees, is no basis for reversing Circuit Court's award of maintenance. Husband's use of resources, including extramarital affair, supports division of property and allocation of debt to him, and does not bar an award of attorney fees to Wife.
Pamela J. Russum, Respondent, v. Gerald E. Russum, Jr., Appellant. Missouri Court of Appeals Western District

No Prejudice Need Be Shown On Departure From Statutes
Circuit Court accepted into evidence an amended social report from Children's Division to replace that filed originally with the petition. But Circuit Court never met with Juvenile Officer after filing of petition to assign report. Failure to strictly comply with statutes on termination of parental rights is reversible error, and "a parent facing termination bears [no] burden of establishing prejudice."
K.L.W., S.F.W., and L.S.W., In the Interest of. Missouri Court of Appeals Eastern District

Source for Post:  The Missouri Bar

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The Kansas Family Law Blog had a great posting recently about the deductibility of attorney's fees, which I have set forth below.  For more information on this issue, see the tax archives of this blog

It’s that time of year again. Of course, the general rule is that lawyers’ fees and costs in connection with obtaining a divorce are not tax deductible. As with many general rules, there are exceptions:

1. Attorneys’ fees related to tax advice. I.R.C. §212(3). Areas having tax implications upon which an attorney may offer advice include the tax effect of the distribution of property, including retirement plans, tax deductibility of interest payments or installments to effectuate an equitable distribution of property, the allocation of the dependency exemption and child tax credit, whether a joint tax return should be filed, the tax effect of unallocated maintenance and child support, the tax implications of the form of alimony, and advice regarding the recapture of front end loaded maintenance in the first three years following separation.

Practice tip: it is not helpful for the client wishing to tax deduct some attorney fees to have a provision in the marital settlement agreement that no tax advice was given.

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The following are some infomative and useful tips on the sale of a residence in divorce from divorcehq.com

For many people going through a divorce their biggest asset is their home or in legal speak, the marital residence. Deciding what to do about the marital residence is often a major issue in a divorce. There are a few different options when it comes to splitting the marital residence.

One option is for one spouse to keep the house and buy out the other spouse's share. Another option is for one spouse to be granted exclusive use for a specified period of time, usually when the youngest child turns 18, after which the house will be sold. Finally, the house can be sold outright with the profits being allocated to each spouse.

Should you sell your house? Hard as it may be this is a decision that needs to be made devoid of emotions. As a practical matter take into consideration whether or not it is financially beneficial to keep the home. If not and you do decide to sell here are a few tips to help you through the process.

Time is money: Put your home on the market as far in advance as possible of purchasing a new one. Remember that when people buy and sell a home there usually is a domino effect. Closing and moving dates have to be coordinated, and the more firmly everyone commits to a window of dates and sticks to them, the better for all involved. Put all agreements about dates in writing, and protect yourself by negotiating financial penalties for failure to live up to the agreement.

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Understand what you can accomplish by making a prenuptial contract before you marry.

If you're trying to decide whether or not to make a prenuptial agreement, you'll need to understand what this type of contract can -- and can't -- do for you.

What You Can Do With a Prenup

Prenuptial agreements are most often used for the following puposes:

Keep finances separate. Every state has laws designating certain kinds of assets accumulated during marriage as marital property or community property, even if these assets are held in the name of just one spouse. If a couple divorces, or when one spouse dies, the marital or community property will be divided between them, either by agreement or by a court. If you want to avoid having some or all of your individual accumulations during marriage divided up by a court, you can do so with a premarital agreement.

Protect each other from debts. Some of us bring debts, as well as assets, to a marriage. If there's no prenup, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. But if you want to make sure that saying "I do" does not mean saying "I owe," you can use a prenup to limit your liability for each other's debts.

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The hards facts just don't lie. Divorce and bankruptcy sometimes go together. In an effort to help you understand what the changes in the new law will mean to those facing bankruptcy after October 17th, I have provided an article from Nolo.

Here are some of the major changes you should know about.

Now that the new bankruptcy law is in effect, the landscape has changed for those who are considering bankruptcy. All debtors will have to get credit counseling before they can file a bankruptcy case -- and additional counseling on budgeting and debt management before their debts can be wiped out. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay at least some of their debt under Chapter 13. And, because the law imposes new requirements on lawyers, it will be tougher to find an attorney to represent you in a bankruptcy case.

Here are some of the most important changes.

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