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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Recent Ruling LP v. EP, WD75030 Missouri Court of Appeals

Following a bench trial, the trial court entered a judgment of dissolution, dissolving the marriage of Mother and Father. The trial court divided the marital property, established custody and awarded child support to Mother. On appeal, Father alleges the trial court erred in (1) "not making a just and equitable distribution of property" in that it accepted Mother's valuation of the home and not the appraiser's opinion; (2) ordering Father to pay a portion of Mother's attorney fees, alleging that there was no substantial evidence to support the award; (3) awarding child support for his nineteen-year-old son ("Son") because Son did not meet the statutory requirement of being enrolled in college by October 1 following high school graduation; and (4) in calculating the amount of child support owed because the court's Form 14 calculation did not contain an overnight visitation credit, nor did it accurately reflect Mother's monthly income.

 AFFIRMED IN PART, REVERSED IN PART

Held:  (1) because a party is qualified to testify as to the value of property and the court can believe or disbelieve either an owner or appraiser's valuation of property, the trial court did not err in accepting Mother's valuation of the marital home such that an equitable distribution resulted;

(2) because substantial evidence established Father's misconduct during the marriage and separation, as evidenced by incidents of domestic violence against Mother and Son, misuse of finances and his incarceration for felony DWI while the case was pending, the court did not err in awarding Mother a portion of her attorney's fees;

(3) Because Son had joined the National Guard in order to receive tuition assistance and planned to enroll one semester late following a required training period, the Court did not err in its award of child support for Son as he fits the statutory exception to emancipation; and

(4) with regard to the actual calculation of child support ordered by the court, there was error in the stated income of Mother, which both sides admitted, such that the court's award erroneously added $30 per month to Father's child support obligation and added to the child support arrearage owed by Father.  Father was not entitled to overnight visitation credits based on evidence that overnight visits had not occurred during the separation and would likely not occur in the future so as to warrant a credit.

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Recent Case: JK v. JK WD74592

Father appeals from a judgment entered in the Circuit Court of Cole  County granting Mother’s motion to modify child support. In its judgment, the circuit court found that a substantial and continuing change in circumstances had occurred including, but not limited to: (1) an agreement by the parties to exercise a "visitation" schedule different than that ordered by the court, (2) a change in the incomes of the parties giving rise to a change of more than twenty percent in the presumed child support amount, and (3) the passage of more than three years since the last modification. The circuit court averaged Father's gross yearly income from the previous four years, but did not consider bonus or interest income. The court found that Father was not entitled to a line 11 credit for overnight visitation because Mother's gross income fell below the $2,100.00 threshold for a parent with four children. The court also altered the previous division of the dependency tax exemptions to award Mother.

HOLDING: REVERSED AND REMANDED.

Where the prior child support amount was established based upon a stipulation by the parties that a jointly prepared Form 14 was accurate and represented the amount of child support that is just, reasonable and appropriate under the circumstances and the trial court found that the Form 14 was accurate and represented an amount of child support that is just, reasonable, and appropriate under the circumstances, the trial court cannot be deemed to have implicitly found the Form 14 amount to have been rebutted. Because the prior judgment establishing the child support amount was based upon the presumed amount pursuant to the child support guidelines, the twenty percent provision of § 452.370.1 was applicable to this case (The 20% rule applies if and when the Form 14 presumed support amount is used).

Mother's petition averred a substantial and continuing change in the circumstances based upon a twenty-percent change in the presumed child support amount as provided for in § 452.370.1 and, therefore, sufficiently pleaded her claim.

The trial court did not abuse its discretion in determining that Mother was not underemployed where she testified that she obtain more than 32 to 35 hours per week with her employer, that she had the children 90% of the time despite the parenting plan, and that Father had asked her to quit working a waitressing job she had so she could watch the children on one of the nights Father was supposed to have the children.

The trial court erred in failing to include interest income earned by Mother, and because of that fact, Mother actually earned sufficient income over the threshold for Father to receive an overnight credit on line 11.

Because circumstances might change, the trial court's award of all four dependency exemptions to Mother cannot be deemed improper per se. However, neither equity nor the best interests of the children can be served by taking away exemptions previously granted to Father only to have one or both go unused, as the evidence reflects is highly likely to occur in this case. Bearing this in mind, on remand, the trial court may re-evaluate its award of all dependency exemptions to Mother and attempt to structure the award to maximize the overall financial benefit of the exemptions to the family unit.

The trial court was not required to accept Father's testimony about bonuses he had received and the likelihood of receiving similar bonuses in the future as credible.

Because the judgment would allow for Father to seek credit for amounts he voluntarily paid in addition to the prior child support amount during the retroactive period of the modification of the child support award and the issue has yet to be decided by the trial court, the issue is not ripe for appellate review; however, the trial court is free to address the issue of such credit on remand

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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: State of Missouri (FSD) v. [Family Court Commissioner] Missouri Court of Appeals, Western District - WD75408

State ex rel. State of Missouri, Department of Social Services, Family Support Division ("Relator") sought a permanent writ of prohibition to prevent enforcement of an order issued by “Family Court Judge” directing the State to advance the cost of genetic paternity testing in an action filed by the alleged father seeking to set aside a judgment of paternity pursuant to section 210.854. The Court issued a writ of prohibition.

Section 210.854 was enacted in 2009, and creates a right to seek to set aside an otherwise final, non-appealable judgment determining paternity and to unwind the financial and criminal ramifications of non-support resulting from the judgment. Section 210.854.3 provides that genetic paternity testing costs required to contest a final judgment of paternity shall be paid by the petitioner, in this case, the alleged father. The Judge entered an order requiring the State to advance the cost of genetic paternity testing. But by the plain language of the section 210.854.3, the Judge did not have the authority or the discretion to impose the obligation to pay for genetic paternity testing on the State, even temporarily.  The Judge argued that the alleged father is indigent and could not be required to pay for genetic paternity testing pursuant to section 514.040.1. However, It is immaterial whether the alleged father had been permitted to pursue this action in forma pauperis,(as a poor person) or whether the cost of genetic paternity testing is a fee, tax, or charge within the scope of section 510.040.1, as there is no authority in any event to shift the alleged father’s statutory obligation to pay for section 210.854 genetic paternity testing to the State.  Absent statutory authority, costs cannot be recovered in state courts from the state of Missouri or its agencies or officials. The State can be assessed the obligation to pay the cost of genetic paternity testing pursuant to the authority of section 210.834.4, a provision relating to the initial determination of paternity. However, that provision has no application to an application to set aside paternity under section 210.854.   

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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: CB v. DB Missouri Court of Appeals, Western District - WD74067

Father requested information concerning Daughter’s college education, and received limited information through the child-support agencies which served as intermediaries between Father and Mother. On March 31, 2010, Father initiated the present proceedings by filing an affidavit for termination of his child support obligation. The circuit court conducted a trial of the matter in April 2011. The circuit court held that Father was entitled to abatement of his child-support obligation during the Fall 2010 academic semester, because he had not been provided with the information concerning Daughter’s college education required by § 452.340.5, RSMo, at the beginning of the semester. The circuit court rejected Father’s arguments that he was also entitled to abatement of his child-support obligations during the Fall 2009, Spring 2010, and Spring 2011 semesters. Father appeals.

REVERSED AND REMANDED.

The Court of Appeals held:

Section 452.340.5 provides for the continuation of child support benefits past the age of eighteen if the child enrolls in an institution of vocational or higher education by the October following their graduation from high school, if certain attendance, academic and notice requirements are met.

Here, Daughter failed to satisfy the requirements of § 452.340.5 in any of the semesters in which the circuit court refused to abate Father’s child support.

In the Fall 2009 semester, Daughter failed to complete twelve credit hours of classes, as required by § 452.340.5. The trial court erroneously held that Daughter was excused from this requirement because she was working at least fifteen hours per week during the semester; the evidence (including Daughter’s testimony) establishes that she failed to meet the fifteen-working-hour threshold. In addition, Daughter’s voluntary withdrawal from one class, which she could have successfully completed but for her withdrawal, cannot be considered “completion” of that class.

With respect to the Spring 2010 semester, Daughter failed to provide Father with copies of her grades for the Fall 2009 semester (which he was entitled to receive “at the beginning” of the Spring 2010 semester), until trial in April 2011. This was too late. In addition, due to her voluntary withdrawal from classes, Daughter failed to complete twelve hours of classes in this semester also.

With respect to the Spring 2011 semester, Daughter failed to provide Father with her course schedule until April 2011. This was not “at the beginning” of the Spring 2011 semester, as required by the statute.

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Recent Case: TLD v. JRD Missouri Court of Appeals, Western District - WD73385

Mother appeals from the trial court's amended judgment order of modification retroactively modifying Father’s child support obligation and ordering Mother to pay Father $19,305.00 in overpaid child support accumulated during the retroactive period. Mother claims the trial court erred in calculating the overpayment.

Even if the trial court erroneously characterized an amount that Mother credited Father, in connection with a settlement which led to a reduction in Father's child support obligation in 2005, as an amount "paid" by Father, that error played no role in the calculation of Father's judgment. Mother's suggestion that Father's judgment against her should be reduced by the credited amount constitutes an impermissible collateral attack on the 2005 Modification which fully and finally determined Father's then existing arrearage.

The trial court's determination that Father was entitled to a reduction in his child support arrearage as of the time of trial by an abeyance amount addressed in the 2005 Modification was not against the weight of the evidence.

Father's judicial admission regarding the amount of his child support arrearage as of the time of trial conclusively negated the trial court's ability to find that all arrearages accumulated after the 2005 Modification had been satisfied and paid in full. Thus, the trial court erred in failing to reduce Father's judgment by Father's admitted arrearage.

Held: Affirmed in part, and reversed and modified in part.

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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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New Case Law: CB v. DB Missouri Court of Appeals, Southern District - SD31614

Notwithstanding the fact that the Missouri case law generally states that tax benefits must go to the custodial spouse unless the trial court expressly finds it unjust or inappropriate to do so, our western district has held that noncompliance with Form 14 directions is not reversible error unless the appellant is prejudiced thereby. Sarwar v. Sarwar, 117 S.W.3d at 171.  Appellate review is for prejudice, not mere error Pruett v. Pruett, 280 S.W.3d 749, 751 (Mo.App. 2009).

“Here, Wife does not argue or suggest any prejudice, nor could [the Court] glean any from the scant record that she has provided. In fact, the indication is otherwise. In her post-trial motion, Wife represented to the trial court that her only income during the two-year history of litigation was unemployment benefits, which had expired; that she had been unable to obtain employment; and that her gross income was “zero.” By contrast, Husband was earning an income, and apparently could benefit from the tax exemption, while Wife seemingly could not. A judgment will not be reversed unless an appellant is prejudiced by an error that materially affected the merits of an action. Rule 84.13(b).”

Wife did not meet her obligation to show that she was entitled to appellate relief and the judgment was affirmed.

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The Missouri Supreme Court has recently issued an order that, effective, January 1, 2012, increases the maximum allowable Form 14 child support overnight credit to 50%.  Specifically, on the Form 14, which is Missouri's child support calculation formula, the non-custodial (paying) parent is given a credit for the number of overnights that parent spends with the child.  The default amounts for periods of overnights totaling 109 or fewer annually remain unchanged, but for total overnights that exceed 109 per year, the allowable credit has been increased from the old maximum of 34% to a new maximum of 50%, but it is still at the discretion of the Court.  The new line 11 overnight credit amounts are as follows:

Annual overnights                 Credit

Less than 36                           0%

36-72                                       6%

73-91                                       9%

92-109                                    10%

110+                                       10-50% at the discretion of the Court

Note however that in order for the paying parent to be eligible for the overnight credit, the parent recieving the child support must meet minimuim income requirements.

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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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Spousal maintenance, formerly known as alimony, can be awarded to either spouse in Missouri divorces.  To support the award, the Court must find that the spouse seeking maintenance (1) lacks sufficient property, including marital properly awarded, to meet their reasonable needs, and (2) the spouse is unable to support themselves through appropriate employment OR is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.  The spouse seeking maintenance must be able to demonstrate a need for it, and maintenance is not awarded as a form of compensation for breach of the "marital contract".

There is no set formula for the calculation of maintenance, as in some other states, and it is determined on a case by case basis.   Duration of the marriage is an important factor also in cases where one spouse forgoes the development of a career while the other is free to advance a career, and maintenance is awarded more often in marriages longer than 10 years, but can be awarded in a marriage of any duration.  Ability to pay and earning capacity are also important factors, and the party receiving maintenance has an affirmative duty to seek employment.

Unless the court can determine an exact date when the receiving spouse will become self supporting, court ordered maintenance will have no termination date, and it must later be terminated by way of motion by the paying spouse.  However, the parties can agree to maintenance for a set term, but that generally will be non-modifiable. 

Maintenance, whether open-ended or non-modifiable for a set term, will still terminate upon remarriage of the receiving party or the death of either party, unless the decree specifically states that the award will survive either death or remarriage.  Maintenance that is open-ended can be modified or terminated upon showing of a substantial and continuing changed circumstances, including the financial resources of both parties, contributions of a new spouse or cohabitant, and the earning capacity of an unemployed party.

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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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There are many ways that the income tax dependency for children in divorce can be handled, although most of them are not supported by the law.  If the parties are in agreement, then nearly any method of claiming the children can be used, including alternating years, splitting the deductions between the parents (in the case of multiple children), allowing the non-custodial parent to claim the children provided that child support is current, a combination of these, or any other method that the parties can come up with.

However, under Missouri law,  the custodial parent is entitled to claim the children for tax purposes each and every year, period.  So unless there is an agreement otherwise, this is what the Court will order.  However, regardless of any agreement or Missouri court order, federal income tax law requires a child to reside with a parent at least 50% of the time to be claimed as a dependent. So, if the parties have agreed to something else, such as alternating years, and the non-custodial parent has the children less than 50% of the time, the Internal Revenue Service (or Department of Revenue) can reject the claimed dependency notwithstanding the court order, as Missouri family courts do not have jurisdiction over the IRS or the power to alter federal law.  The only remedy would then would be for the parties to return to state court to seek reimbursement for the dollar value of the claimed dependency from the other parent, which the Court may not even entertain. 

So the general rule would be that the custodial parent gets to claim the children each year, unless an agreement is reached otherwise. But the word of caution on agreements (particularly for the non-custodial parent), is that both parties have to follow it, or it can be rejected by the taxing authority with the only possible remedy being a return to state court.

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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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A dispute that Missouri family law attorneys see on a regular basis is the sharing of children’s extracurricular activity expenses. Under Missouri law, the Court can require parents to share certain expenses, over and above the monthly child support amount. Included in these expenses are extracurricular activities, educational expenses, uninsured medical costs, and any other extraordinary costs. The Court of Appeals has recently held that, at least to extracurricular activities, and presumably to education and other expenses, the order must have “some limitation as to the scope of activities and resulting expenses or a cap on the total amount of [the parent’s] financial responsibility…to make the order sufficiently certain to be enforceable.”

This means that an order cannot simply require the parents to share a certain percentage in “all extracurricular activities”, particularly when one parent is given the discretion to make all decisions relating to those expenses. The Court noted that “[t]he term “extracurricular activities” is itself extremely broad. Not only is the range of activities that might qualify hard to define, each activity might include a number of different categories of expense (i.e. lessons, camps, equipment, uniforms, or travel). The Court held “that under the facts of this case the motion court should have used limiting language to define the scope of the activities covered by the order or, in the alternative, placed some sort of cap on the extraordinary expenses that Father had to pay for Daughter’s extracurricular activities, especially since it gave Mother sole discretion to decide which activities would occupy Daughter. A $200 monthly limit was imposed.

It is worth noting, though, that an agreement that is made for the sharing of expenses when the nature and extent of the expenses is known at the time is still enforceable regardless of limiting language, since the paying parent would have at least a general idea of what they were on the hook for financially

To see the entire opinion, click here.

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The Circuit court ordered re-financing of the house after divorce.  At the hearing on a subsequent contempt action, the circuit court found that failure to comply was not contemptuous because party did not have the financial ability to comply with the order. Record supports such finding.  The court stated that  "A party alleging contempt establishes a prima facie case for civil contempt when the party proves: (1) the contemnor's obligation to perform an action as required by the decree; and (2) the contemnor's failure to meet the obligation “The alleged contemnor then has the burden of proving that person's failure to act was not due to her own intentional and contumacious conduct."

The second point on appeal was the child custody modification. The court stated:

"'Under § 452.410.1, a court may not modify a prior custody decree unless it finds, on the basis of facts which have arisen subsequent to [that] decree, that (1) a change has occurred in the circumstances of the child or his custodian and (2) a modification of custody is in the best interests of the child."A motion to change from joint custody to sole custody requires a showing that the change in circumstances is substantial.""[T]he parent requesting the change of custody has the burden of proving the change in circumstances warranting custody modification."Thus, in ruling on a motion to modify from joint legal to sole legal custody, the trial court must first determine whether the evidence establishes that a substantial change has occurred in circumstances of the child or the child's custodian; and, if so, it must then consider whether the best interests of the child would be served by modifying custody.

A Substantial change in circumstances includes parents’ failure to communicate for eight months.

The entire opinion can be read here.

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The Missouri statute that mandates the continuation of child support after age 18 if the child attends college was amended in 2007, and provisions were added that are somewhat contradictory. In a recent ruling by the Missouri Court of Appeals, the Court clarified the statute, as well what will cause a child to fail to meet the credit hour requirements of the statute.

Section 452.340.5 RSMo states: If when a child reaches eighteen, . . . [i]f the child is enrolled in an institution of vocational or higher education not later than October first following graduation from a secondary school . . . and so long as the child enrolls for and completes at least twelve hours of credit each semester, not including summer semester, at an institution of vocational or higher education and achieves grades sufficient to reenroll at such institution, the parental support obligation shall continue until the child completes his or her education, or until the child reaches the age of twenty-one, whichever first occurs. . . .  

The statute goes on to provide that "[w]hen enrolled in at least twelve credit hours, if the child receives failing grades in half or more of his or her courseload in any one semester, payment of child support may be terminated and shall not be eligible for reinstatement." 

The case law until the statute was amended clearly held that a child must enroll and actually complete 12 hours of credit, and failing grades in any class could cause the child not to meet the credit hour requirement as no credit is given for a failing grade. However, the court has now clarified that the prior case law, specifically the Lombardo line of cases, is effectively overruled and now, with the addition of “failing half or more of his or her courseload” language, a failing grade no longer triggers a failure to comply with the credit-hour requirement, provided that the child does not fail half or more of their classes (if enrolled in at least 12 hours). The Court stated:

“Where a student voluntarily withdraws from a class prior to its completion, he or she clearly fails to meet the requirements of the statute that the student complete the class [12 hour requirement]. On the other hand, where a child receives a failing grade in a course, provided the child does not fail half or more of his or her classes, the child is deemed to satisfy the requirements of § 452.340.5.3” 

Interestingly, in the recent case, the child actually withdrew from the class instead of failing, but the evidence showed that the child was withdrawn by the teacher and not the student himself as a “favor” to avoid receiving a failing grade, so the Court deemed that a failing grade and treated it as such under the statute.  Outside of this exception however, it seems that a typical withdrawal will fall under the “completion” requirement of the statute.

The entire opinion can be read here

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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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Generally, in Missouri child support terminates when a child dies, marries, enters the military, becomes self supporting, or turns 18. However, child support can continue after age 18, and all the way to age 21, if the following requirements are met:

If the child is enrolled in and attending high school when he or she turns 18, then child support will continue through the completion of the high school program or age 21, whichever first occurs.

If the child is enrolls in an institution of vocational or higher education (college) by October 1 following graduation from high school (or completion of a GED program), the obligation for child support can continue until the child completes the program or turns 21, whichever occurs first. However, the child must enroll for and complete (pass) at least twelve hours of credit each semester, not including the summer semester, and achieve grades sufficient to re enroll.  The credit hour requirement is reduced to 9 if the child is employed and working at least 15 hours per week.

To remain eligible for continued child support, at the beginning of each semester the child must submit to each parent a transcript which includes the courses enrolled in and completed for each term, the grades and credits received for each such course, and an official document from the institution listing the courses which the child is enrolled in for the upcoming term and the number of credits for each such course. If the child fails to comply with this requirement, the paying parent can motion the court for an abatement (temporary termination) for the particular semester. However, if the non-custodial parent makes a formal request for the required documents, the child must produce them within 30 days or the child support can be permanently terminated.  Also, either parent or the child can ask the court for support to be paid directly to the child.

Under the law, an "institution of vocational education" means any post-secondary training or schooling for which the student is assessed a fee and attends classes regularly. "Higher education" means any community college, college, or university at which the child attends classes regularly.

Note that a modification or termination of child support under any of the above scenarios is not automatic, and the parent wishing to modify or terminate must do so by filing a motion with the Court.

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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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In a recent termination of parental rights case, the Court stated that statutory grounds of abandonment, neglect, and unfitness require clear, cogent, and convincing evidence. The Incarcerated parent’s diligent efforts at maintaining contact with child refuted such allegations. The “Child may suffer from Father’s absence, but getting in trouble before he knew about Child is no proof that Father now wants no relationship with her.” Failure to send money from 28¢ per day wages was de minimis. Incarceration does not raise the presumption of unfitness. The child’s best interests require only preponderance of evidence, but the issue never arises until statutory grounds are established. 

The entire opinion can be read here.

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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 Missouri, there are two primary ways that a non-married parent can seek to establish child support, judicial and administrative.   A judicial action is through the circuit court, and an administrative action is through the Family Support Division. The Division is an administrative agency which has the power to issue binding orders for child support, which may or may not later be filed as a judicial action in the appropriate circuit court. The agency has their own administrative process, where a case worker calculates child support on information provided by the custodial parent, and the non-custodial parent is then served, usually by mail, with the notice of an order. The non-custodial parent is given the opportunity to dispute the amount calculated by the case worker, and request a hearing within a certain number of days. If the non-custodial parent does not act, then the order becomes final, and the non-custodial parent is bound without further legal process. However, if a hearing is requested, then a telephone “trial” before a hearing officer is conducted, and the child support is determined based on the evidence presented. Also, a parent can petition the circuit court for judicial review of the administrative order within 30 days of the entry of an administrative order, even after an administrative hearing.

However, the non-custodial parent must know that the hearing docket is backlogged for many months, sometimes even a year, and even after the hearing is conducted it may be many more months before the order is issued. Once the order finally is issued, it is set to take effect all the way back to the date that the case was started, so the non-custodial parent may have a year or more of back child support simply because of the slow administrative process, even though there was no order in effect for those months.  This can negatively affect the obligor's credit, and the arrearage is usually assessed at an additional amount per month, basically raising the child support by as much as a few hundred dollars.  Also, once all of this is over, there is an order for child support, but the agency does not have the power to issue orders for custody or visitation, and if the non-custodial parent is the father, essentially there are no legal rights established, other than the “right” to pay child support

The best course of action to take when served with an administrative action for child support is to immediately consult with an attorney. At a minimum, the attorney can represent the non-custodial parent at the administrative hearing to ensure the proper evidence is before the agency and that the support amount is calculated properly. But more importantly a good child support attorney may be able to, in effect, “move” the case to a circuit court before a judge through a judicial action, establish legal custody or visitation rights, ensure paternity is determined conclusively, terminate the administrative action, and remove the family support division from the case.   In a judicial action, unless state debt or interest is in issue, the Family Support Division or other state agency will not participate in the case.  Timing is everything however in dealing with these cases, so consulting with an attorney immediately is critical to avoid a potential financial mess.  

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On July 7, 2009, Governor Jay Nixon signed into law senate bill number 141, which modifies Missouri’s paternity laws, effective August 28, 2009. The new law revises sections 210.826, and 210.828 and adds a new section 210.854, which will now allow men who have been declared the father of a child by a court to petition to set aside the judgment and obtain relief from child support obligations when DNA testing shows that they are not the biological father, if filed within certain time limits.  

The provisions of the new paternity law are summarized as follows:

In an action to determine paternity of a child, a notification form shall be attached to the delivery of the petition through service of process. The notification form shall prominently state in bold face type as follows: "Important Notice. If you do not respond to this action, a judgment of paternity may be entered against you and you may be ordered to pay child support, medical support or reimburse someone for support previously paid for the child. You have the right to contest that you are the father of the named child and you have the right to request genetic testing to prove whether or not you are the father."

The act also provides that a person may file a petition to challenge entry of a judgment of paternity and support upon filing an affidavit stating that evidence exists which was not considered before entry of judgment. Such petition shall also include either an allegation that genetic testing was conducted within the past 90 days using DNA methodology, was performed by an expert, and that the test results indicate the petitioner is not the child's father or a request to the court for an order of genetic paternity testing using DNA methodology. The petition to set aside the judgment may be filed at any time prior to December 31, 2011. After that, the petition shall be filed within two years of the entry of the original judgment of paternity and/or support, whichever occurs later.

The court, after a hearing where all interested parties have been given an opportunity to present evidence and be heard and upon a finding of probable cause to believe the testing may result in a determination of non-paternity, shall order the relevant parties to submit to genetic paternity testing. The petitioner shall pay for the costs of testing.

The court shall grant relief, unless the court makes written findings of fact and conclusions of law that it is not in the best interest of the parties to do so, and enter judgment setting aside the previous judgment of paternity and child support, including a previous acknowledgment of paternity, extinguish any existing child support arrearage, and order the Department of Health and Senior Services to modify the child's birth certificate accordingly upon a finding that the genetic test was properly conducted, accurate, and excludes the petitioner as the child's father.

In addition, any petitioner may apply for expungement of criminal nonsupport records to the court in which the petitioner pled guilty or was sentenced. Such expungement shall only apply to records for criminal nonsupport of a child or children for which the petitioner was found not to be the biological father.

The provisions of this act shall not apply to grant relief to the parent of any adopted child nor shall such provisions be construed to create a cause of action to recover child support or state debt previously paid under court order. The petitioner shall not have a right for reimbursement of any monies paid previously under said order.

Beginning in 2010, the family support division shall track and report to the general assembly the number of cases known to the division in which a court, within the calendar year, set aside a previous judgment of paternity and support under the provisions of this act.

The entire text of the bill can be read here.

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An issue that I have seen a few times, and that was recently before the Court of Appeals for the Southern District, involves the incorporation of maintenance (alimony) provisions into a Marital Settlement Agreement, where the agreement provides that the terms are not subject to modification.   

Extreme care should be used when drafting such a document, as many times these agreements have  "boilerplate" language either at the beginning or end of the document, which says that the agreement  is the entire agreement and it is not subject to modification or change. That is all well and good for a contract, and the parties would want that in there for most purposes. Legally that language is not effective for child custody, visitation, or support orders, but it would be necessary for the division or property provisions. 

The problem is with maintenance.  If the parties agree to a certain amount and schedule for maintenance, that would normally be modifiable unless stated otherwise.  However, if the "non-modifiable" language is buried elsewhere in the document, usually at the end, that would be effective to make the maintenance non-modifiable, which would put the paying spouse on the hook indefinitely.  Obviously this could be a very expensive, unintended mistake.

So, the parties should make very clear, in the same paragraph, the type and duration of the maintenance, as well as whether or not it is modifiable.  Also, they should make sure that the provisions for non-modification of the settlement agreement, which could be anywhere in the document, do not apply to maintenance, unless that is the intent of the parties.  Also, each party should just thoroughly read and understand the agreement before signing it, even the "legalease".

For a recent case dealing with this issue, click 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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What happens when a parent tries to avoid a child support obligation because they are not working or only have a small amount of income? Well, in the eyes of the Court, that parent will be treated as if they did have income sufficient to pay the child support. The most common situation is when it is apparent that a parent is not working specifically to avoid child support, but there are many factors that the Court can consider when making this decision. This can happen in a divorce, paternity, or child support case, and it is called “imputed” income. The court can consider any relevant factor, and recent cases say the following:

For the non-custodial parent

• Any imputed income must be within a parent’s capacity to earn, and if a parent earned a different income prior to trial the court should consider that income in calculating retroactive child support.  
• Even if a parent did not try to evade child support, the court can impute higher income than earned if the parent has the earning capacity.  
• Imputed income must be supported by evidence, not speculation, and the court record must reflect how the income was figured.  
• The income imputed to an underemployed or unemployed parent must be according to what they could earn if using their best efforts to find employment
• The court can impute income if a parent has voluntarily and deliberately become unemployed, and a court should not do so if there is no showing of an attempt to evade responsibility
• If a parent is terminated and does not use best efforts to find new employment, refuses offers, or fails to show unemployment is only temporary, income may be imputed

For the custodial parent

• Factors include age, maturity of the child, availability of child care givers, relationship between the expense of child care and the net income the parent would receive, the reasons the parent stays home with the child.
• A court may not treat imputation of income on the Form 14 different than its maintenance calculation

Next installment: Adjustments to income for child support, maintenance, health insurance, and medical costs

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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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For the purposes of calculating child support in Missouri, the Form 14 calculation is used.  The starting point is the Gross Income of the parties.  So, what does that include and what exactly does it mean?  The following is a summary of the official comments and relatively recent court rulings on the definition.

“Gross income" includes, but is not limited to, salaries, wages, commissions, dividends, severance pay, pensions, interest, trust income, annuities, partnership distributions, social security benefits, retirement benefits, workers' compensation benefits, unemployment compensation benefits, disability insurance benefits, veterans' disability benefits, and military allowances for subsistence and quarters.

Overtime compensation, bonuses, earnings from secondary employment, recurring capital gains, prizes, retained earnings and significant employment-related benefits maybe included, in whole or in part, in "gross income" in appropriate circumstances.

Excluded from "gross income" is temporary assistance for needy families (TANF) payments, Medicaid benefits, supplemental security income (SSI) benefits, food stamps, general assistance benefits, other public assistance benefits having eligibility based on income, and child support received for children not the subject of this proceeding.

If a parent receives rents or royalties or is self-employed, in a sole proprietorship, or business with joint ownership, "gross income" is gross receipts minus the ordinary and necessary expenses incurred to produce such receipts.  

"Income" for purposes of computing the presumed child support amount consists of a financial benefit or money received by a parent that could have a positive impact on the parent's ability to support the parent's children.

Overtime Compensation

When determining whether to include overtime compensation, the Court must consider (1) Periods of temporary child custody, (2) The motivation of the parent working the overtime over the last three years. (3) The amount of the overtime. (4) The expectation that the overtime will continue, (5) additional dependents.

Overtime may be included in a parent’s yearly gross income in appropriate circumstances.  The Court must consider all relevant factors, including the realistic expectation that a parent who receives a bonus or overtime will continue to do so.  The court can ignore income history and look at a single year's income figure if it finds that figure to be the most accurate predictor of a parent’s income

Bonus and Significant Employment Related Benefits:

The same 5 factors listed above apply to bonus income. Additionally:

Bonuses are discretionary, and the court may accept or reject the reliability and pattern of bonus income. 

Expense reimbursements should not be included in monthly gross income on Form 14 because such reimbursements are a repayment or indemnification, which is compensation for loss or damage, as opposed to a benefit, which is profit or gain.

Next Installment:  Imputed income

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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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Recent Case Summary

Statute requires interest on maintenance not paid. Neither "good faith . . . reliance upon what [Obligor] understood to be a valid court order" that no interest was due, nor Obligee's inconsistent theories on amount due, are a defense. Circuit Court did not abuse its discretion in denying attorney fees award "based on a variety of factors expressly authorized by" statute.

Case Holding

Appellant was entitled to statutory interest pursuant to section 454.520.3, RSMo, for the entire time period that Respondent failed to pay his full obligation under the divorce decree. The obligation to pay interest under section 454.520.3 is mandatory and is intended to compensate the recipient spouse, rather than punish the payor. Although Respondent may have relied in good faith on the circuit court's 2002 modification order, this court held that the 2002 order was null and void; Respondent's obligation to make $4,000 per month maintenance payments under the original divorce decree thus subsisted throughout the relevant period. On this issue the judgment is reversed, and remanded to the circuit court for calculation of the interest owing to Appellant.

The circuit court denied Appellant's request for attorneys fees and costs based on multiple factors, including Appellant's resources, the justiciability of the issue concerning the validity of the 2002 modification, Appellant's delay in seeking an attorneys fee award, and her conduct during the litigation. Pursuant to section 452.355.1, RSMo, the circuit court has broad discretion in deciding whether an award of attorneys fees is warranted. This court finds no abuse of discretion in the circumstances, and the circuit court's denial of attorneys fees and costs is affirmed.

Read the Full opinion here

Source for Post:  Missouri Bar

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The Issue of attorney's fees often comes up in domestic litigation.  Missouri has adopted the American Rule regarding attorney's fees in that, absent statutory authorization or contractual agreemtn, each litigant, absent few exceptions, must bear the expense of their own attorney's feesl  However, Missouri's dissolution of marriage law allows the court to order one party to pay the other's attorney's fees, but the court must consider all relevant factors including the financial resources of both parties, the merits of the case, and the actions of the parties during the action.  The inability of one spouse to pay his or her own or the other party's attorney's fees is not determinitive.  Some examples supporting an award of fees would include unfounded allegations of child abuse, concealing assets, abuse of discovery, and failure to appear for trial. 

Recent Case
The Party seeking an award of attorney fees has the burden of proof to show that an award of attorneys fees is appropriate.  In the recent case cited below,  the record contains some evidence of father's financial resources—retirement and disability—but none on Mother's financial resources or on "any unusual circumstances warranting departure from Missouri's adoption of the American rule requiring each litigant to bear their own expenses." Circuit Court abused its discretion in awarding fees. Reversed.
Tina Marie Hihn, Respondent, v. Joseph Alexander Hihn, Appellant. Missouri Court of Appeals Eastern District

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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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One very important, and often overlooked, factor to consider as part of your dissolution of marriage is a re-evaluation, (or first evaluation as is often the case) of your estate plan.   If there is no plan in place, the laws that will determine how your estate will be divided upon your death change significantly when you are divorced.  If there is a plan in place, you will most certainly want to make changes for your future to match the changes in your life today.  Below are some very basic points on estate planning from about.com:

If you have assets, no matter what your age, marital status, or financial wealth, you should plan your estate in the event of your death or incapacitation. If you should die without a sound estate plan, someone will be exposed to additional grief and expense. If you become incapacitated, your bills might not get paid. You could also be put on life support which is OK unless you have strong feelings about your life being prolonged artificially if you have no chance for recovery. A little preparation and maintenance could make this difficult time less taxing for those you love and who love you.

There are many reasons to have a sound estate plan but here are eight I feel are most important. If you should die or become incapacitated, a sound estate plan could:

1. save your family thousands of dollars
2. distribute your assets to those of your choosing, not of the government's choosing
3. designate who will raise your minor children
4. make sure someone is authorized to pay your bills
5. avoid conflicts among your family members
6. make sure your assets aren’t divided among your children’s ex-spouses
7. keep your children from frivolously spending the inheritance
8. prevent death taxes.

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The following article has recently appeared on at least a few of the family law blogs, which I found to be particularly interesting.  Thanks to the Oklahoma Family Law Blog and the Georgia Family Law Blog for sharing this information with us.

Marriage has become a delicate venture. According to the U.S. Census bureau, about nine out of ten people will marry sometime in their lives, but about half of first marriages will end in divorce. And while some marriages end peacefully, with both sides agreeing to an equal and fair settlement, some do not, and the ensuing process can get quite vicious.

When ex-spouses significantly distrust each other, it is advisable to engage the services of a lawyer, especially if one or both do not understand their household finances and the economic implications of marital settlements. In turn, attorneys often hire CPAs as forensic accountants to help represent the spouse who doesn’t have access to the family’s financial information. In these cases, the forensic analysis might include reviewing financial data to determine its accuracy and reasonableness; determining each spouse’s standard of living and disposable income; locating hidden assets; and determining what property may be considered separate from marital property, especially if one of the spouses runs a closely held business. This type of work has created a highly focused segment for the profession: forensic accounting in divorce engagements.

Marriage: The Leading Cause of Divorce? Out of the more than 2 million marriages performed last year, 60% were the first marriage for both bride and groom. Unfortunately, for those first marriages that do end in divorce, the average length of a first marriage is only about eight years. The median duration of second marriages that end in divorce is only about seven years.       

Most newlyweds probably don’t think of their wedding day as the beginning of a personal business partnership: making money, budgeting, accumulating assets, and investing for the future. Nevertheless, couples should still plan how to divide this property at the blissful beginning, not the bitter end. This planning could take the form of a premarital agreement, which may not be a perfect document, but is generally enforceable in all 50 states. This is why both spouses must understand their household’s finances. It is not a good idea to allow one spouse to run all the finances while the other spouse knows nothing about it. After all, the person you plan to spend the rest of your life with would never try to hide something from you … or would they?

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Considering the fact that financial issues are a significant cause of stress on the family, I thought the following article, recently published at msnbc.com provided some very useful information.  It is republished below:

Most Americans have no emergency savings, a new survey shows. The findings are consistent with a host of other surveys and government data that chronicle Americans' abysmal savings rate and, more important, our lack of preparedness for life's unexpected events.

Released Monday at a press conference designed to call attention to "America Saves Week," the survey by the Consumer Federation of America and other consumer agencies indicates that only 40 percent of adult Americans maintain separate emergency savings accounts. And about one-third of those savers have set aside less than $2,000 for that inevitable rainy day.

Even $2,000 is considerably less than the 3- to 6-months of living expenses that most personal finance advocates recommend as an emergency kitty. Coincidentally, it is exactly the amount Hurricane Katrina victims received in "expedited assistance" aid from the federal government in the days after the storm. Thousands of victims didn't get the benefits because of computer glitches and other technicalities, and many of them were left with nearly no means of support after their homes and jobs were washed out by the storm. The Katrina aftermath shined a harsh light on the financial preparedness of many American consumers.

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Bankruptcy treats debts that were incurred in the course of a divorce or legal separation differently than run of the mill third party debts. The most common kinds of debts incurred during divorce are 1) the obligation of one spouse to pay the other a sum of money in connection with division of the marital property; and 2) the obligation to protect the other spouse from the debts to third parties awarded to the debtor for payment.

Section 523(a)(15) of the Bankruptcy Code makes debts incurred in divorce non dischargeable in Chapter 7 and Chapter 11 cases. Gone, in the amended bankruptcy code, is the provision that called for a weighing of the hardships that discharge might impose on the non debtor spouse. Such debts are now flat-out non dischargeable.

The distinction to be noted is that the debtor can discharge the obligation to Big Credit Card Company, awarded to him for payment in the divorce, but he can’t discharge his obligation to his ex to hold her harmless should Big Credit Card Company sue her for the debt.

In Chapter 13, however, those debts are dischargeable, without debate.

In every chapter in the bankruptcy code, spousal support, alimony and child support are non dischargeable.

Source for Post: Bankruptcy Law Network and Moran Law Group

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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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Separation Agreement gave Amway distributorship to Wife for monthly payments to Husband. That payment was considered support because nothing else provided maintenance, the payment was in installments, it was subject to modification based on Amway profits, and it terminated on death of Husband. Trial Court erred in characterizing Wife's debt to Husband as a property settlement, dischargeable in bankruptcy, rather than nondischargeable support.

Author’s caveat: This case was decided under the bankruptcy law as it was before October 17, 2005. Under the new bankruptcy law, all domestic support obligations, which include alimony, child support, and property division, are generally non-dischargeable in bankruptcy.

To read further: Alticor, Inc., and Quixtar, Inc., Plaintiffs, v. Harold W. Grissum, Defendant-Appellant, and Joyce C. Soldi, Defendant-Respondent. Missouri Court of Appeals Southern District

Source for Post:  The Missouri Bar

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QUESTION:

My fiancée has asked about putting her name on the deed to my house after we get married. I don't want to do that in case things don't work out and we divorce. But I've heard that when I marry all of my assets automatically become half hers, anyway. I should say that I will be the only one paying for the mortgage and home improvements. What does the law say, and will a premarital agreement remedy the situation?

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Learn about tax breaks available to most parents.

New parents often find themselves overwhelmed by the expenses that come with a baby. From nursery furnishings to "onesies" to countless diapers, your little bundle of joy is going to cost you, well, a bundle. Fortunately, the federal government offers a number of tax breaks to offset the cost of raising a child. Here you'll learn about two tax breaks for which most parents qualify: the dependent exemption and the child tax credit.

The Dependent Exemption

You might be surprised to learn that the IRS does not tax every single dollar that you earn. Instead, the IRS gives you a very modest tax exemption ($3,200 per person in 2005) to cover your basic living expenses. Single people can take one exemption for themselves. Married couples can take two exemptions (one for each of them).

When you add a new child to your family, you can add one more exemption to your income taxes -- called a "dependent exemption." This means that you get an additional tax deduction of more than $3,000 every year until your child turns 19 -- a nice baby gift from Uncle Sam!

In terms of actual tax savings, the amount you save with the dependent exemption depends on your tax bracket. The higher your tax bracket, the more savings you get -- unless your income is so high that you cannot claim the exemption at all (see below). For example, if you were in the 10% tax bracket, you would save about $320 per child with the dependent exemption in 2005. But if you were in the 25% tax bracket, the dependent exemption would save you $800 per child.

Like many tax breaks, however, the dependent exemption is phased out for higher earning families. For the 2004 tax year, for example, married couples filing jointly could not claim the dependent exemption at all if their adjusted gross income was more than $336,550, and they lost a portion of their dependent exemption if their adjusted gross income exceeded $214,050.

If you qualify for the dependent exemption, claiming it on your tax return is easy. Simply complete line 6C of Form 1040 or Form 1040A, making sure to provide a Social Security number or Adoption Taxpayer Identification Number for your child in column 2. (See Social Security Numbers and Why Your Baby Needs One.) Also be certain to complete line 41 of your Form 1040 or line 26 of your Form 1040A.

The Child Tax Credit

The dependent exemption is not the only tax break that parents can claim. Provided that your income is below a certain limit ($130,000 for married couples filing jointly in 2004), you can also claim the child tax credit. The child tax credit trims your tax bill by $1,000 per child. Because it is a credit, and not a deduction, the child tax credit gives you $1,000 back in your pocket for every child that you have.

To determine the amount of the child tax credit you can claim, complete the child tax credit worksheet contained in IRS Publication 972, Child Tax Credit. (You can download this publication for free from the IRS website at www.irs.gov.) Then enter the amount of your child tax credit on your tax return (line 51 of Form 1040 or line 33 of Form 1040A). Also complete line 6C of Form 1040 or Form 1040A and provide a Social Security number or Adoption Taxpayer Identification Number for each child. Finally, check the box in column 4 of line 6c for each child for whom you are claiming the child tax credit.

Copyright © 2005 Nolo

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