Divorce

When filing for divorce, many people are aware of the common financial ramifications, including: property division, child and spousal support, and healthcare coverage changes. The impact of a divorce on the parties’ taxes, however, is often overlooked or misunderstood.

Divorce may affect your tax situation in a number of ways. The right to claim a dependent child will affect the amount of money owed or refunded at the end of the year. There may be money owed to the IRS from the sale of marital property, such as a house. Additionally, there are important things to know about the tax consequences of child support and spousal support payments.

Child support payments are treated as if they have no tax consequence: they are not taxable to the payee, nor are they deductible for the payor. However, spousal support typically is treated as income for the payee. As such, the payee generally must pay taxes on the spousal support payments received and the payor is allowed to deduct the money paid.

A more severe tax consequence may occur years after a couple divorces. Many married couples file their tax returns jointly. This means that each spouse has both individual and joint liability for any taxes owed for that tax year. In many cases, one spouse handles all of the finances for the household, including the taxes. If that spouse makes a mistake on the year’s tax return or purposefully claims less income than the household received, the other spouse is jointly liable for that error and any money owed to the IRS as a result.

The innocent spouse may have no knowledge that money was hidden or that the returns were done incorrectly. However, the IRS will still hold the spouse liable for the money owed unless a claim for “innocent spouse relief” is filed.

If you find yourself in a situation where the IRS is penalizing you for back-taxes owed from a year you were married and you had no control or knowledge of your financial situation at that time, you may be able to claim “innocent spouse relief.” A qualified attorney can assist you with reviewing your situation to determine whether or not you have a claim for “innocent spouse relief.”

Getting divorced is never easy. An experienced family law attorney will walk you through the process and ensure you understand the implications of divorce on all aspects of your life, current and future. For more information about the tax consequences of a divorce, please contact Banas Family Law for assistance.

Under Minnesota law, “marital property” is any property acquired by either spouse during the marriage, unless it:

“(a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse;

(b) is acquired before the marriage;

(c) is acquired in exchange for or is the increase in value of property which is described in clauses (a), (b), (d), and (e);

(d) is acquired by a spouse after the valuation date; or

(e) is excluded by a valid antenuptial contract.” (Minnesota Statute 518.003 Subd. 3b)

As noted above, an antenuptial, or premarital agreement, can affect the court’s determination of “marital” and “nonmarital” property by specifying what property is to be considered nonmarital in the event of divorce, separation, or the death of one of the parties.

According to Minnesota Statute 519.11, to be valid, the agreement must be signed prior to the date of marriage in front of at least two witnesses, be based upon fully disclosed financial information, and have been signed after each party had time to consult with an attorney.

For advice on either preparing or signing an antenuptial agreement in Minnesota, contact Banas Family Law at (651) 361-8109.

Traditional divorces are often highly confrontational and antagonistic, causing undue stress on the individuals involved. This adversarial approach may make it difficult for the parties to work together after the divorce is finalized, particularly in regard to child rearing decisions and parenting time agreements. Luckily, there are other options available to those wishing to dissolve their marriage as amicably as possible.

Alternative dispute resolution processes help parties come to amicable agreements outside of the courtroom. There are several types of alternative dispute resolution, including: mediation, arbitration, collaborative law, and (in Hennepin county) early neutral evaluation. These resolution processes typically produce less stress, cost less and are resolved more quickly than a traditional divorce.

Meditation is a process through which the two parties, along with their attorneys, work together to reach a mutually agreed upon settlement. A highly trained third party, called a mediator, facilitates the negotiation. Mediation is non-binding, which means if the parties cannot reach an agreement the case may still proceed to court.

Arbitration is much like mediation, except that the third party, called the arbitrator, issues a final, binding decision. Due to its binding nature, and to the fact that obtaining an appeal is highly unlikely, arbitration is most often used to settle post-divorce issues, including those involving child custody and/or parenting time.

Collaborative law is a relatively new process through which both parties and their attorneys formally agree to work together to reach a settlement. If during the course of negotiations a settlement cannot be reached, the attorneys must withdraw and the parties must obtain new representation in order to proceed to court.

A process created by the Hennepin County Family Court, early neutral evaluation utilizes a team, made up of at least one male and one female, to evaluate the case and inform the parties of the most likely resolution if the case were decided by a judge. This enables the parties to understand what would most likely happen in the event they cannot reach an agreement. This process may be used in conjunction with mediation and collaborative law.

To learn if mediation or another form of alternative dispute resolution is right for your Minnesota dispute, contact Banas Family Law at (651) 361-8109.

Except for child custody issues, the division of marital property is often the most adversarial and stressful aspect of a divorce. Determining who gets what can be complicated. The overall division typically depends on whether the property, or asset, is deemed to be marital or non-marital in nature.

According to Minnesota Statue 518.003, Subd. 3b, “Marital property” is defined as all property, whether real or personal, “acquired by either spouse subsequent to the marriage and before the valuation date . . . regardless of whether title is held individually or by the spouses in a form of co-ownership.” This includes retirement accounts and vested public or private pension plan benefits or rights.

In Minnesota, the court presumes that “each spouse made a substantial contribution to the acquisition of income and property while they were living together as husband and wife.” (Minnesota Statue 518.58, Subd. 1) As this is the presumption, the court strives for a “just and equitable division of the marital property,” and typically divides marital property equally between the parties. Valuations are generally based upon the date of the initial prehearing settlement conference, unless both parties agree to a different date.

But, what about assets held prior to marriage? If one spouse wishes to claim a sole interest in any asset, that spouse must provide proof that the asset is non-marital in nature.

“Non-marital property” refers to “property real or personal, acquired by either spouse before, during, or after the existence of their marriage, which (a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse; (b) is acquired before the marriage; (c) is acquired in exchange for or is the increase in value of property which is described in clauses (a), (b), (d), and (e); (d) is acquired by a spouse after the valuation date; or (e) is excluded by a valid antenuptial contract.” (Minnesota Statute 518.003, Subd. 3b)

Proving that property is non-marital in nature can be extremely difficult. Often, property that was originally non-marital can become partially marital during the course of the marriage. As experienced Minnesota divorce attorneys, Banas Family Law can assist you in satisfying the burden of proof required by the court. If necessary your attorney may utilize the services of a forensic accountant to “trace” your non-marital assets and provide expert testimony on your behalf in court.

In a divorce, identifying marital and non-marital assets and understanding how a court renders its valuations is essential to ensuring that your financial interests are protected. Minneapolis family law attorney Chris Banas has extensive experience assisting clients in asset identification and valuation. To discuss your case, call 651-361-8109 now.

Divorce can be complicated. Property must be divided, child custody agreements must be reached, and, sometimes, spousal maintenance (alimony) is considered. When one spouse owns a business, however, a Minnesota divorce can become a more arduous process.

These types of divorces typically involve larger assets that must be divided (both separate and co-owned), and there is generally a greater income disparity between the parties than in divorces where neither spouse owns a business. Additionally, there is an increased likelihood of one spouse being a stay-at-home parent, which may influence who the court views as the primary caregiver. Additional considerations include: the tax consequences of property division, and the fair-market value of the business.

In states with community property laws, each spouse is generally entitled to fifty percent of the business, regardless of who owned and operated it. In contrast, Minnesota is an “equitable distribution” state. This means the court will determine how to divide the marital property according to Minnesota Statute 518.58, subdivision 1:

“…the court shall make a just and equitable division of the marital property of the parties without regard to marital misconduct, after making findings regarding the division of the property. The court shall base its findings on all relevant factors including the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, opportunity for future acquisition of capital assets, and income of each party. The court shall also consider the contribution of each in the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property, as well as the contribution of a spouse as a homemaker. It shall be conclusively presumed that each spouse made a substantial contribution to the acquisition of income and property while they were living together as husband and wife. The court may also award to either spouse the household goods and furniture of the parties, whether or not acquired during the marriage. The court shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable. If there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.”

Divorces involving professional business owners (doctors with their own practices, for example) can carry long-term financial consequences. Due to the high stakes involved, it is imperative for each spouse to obtain the counsel of a qualified Minnesota divorce attorney.

To ensure your business assets are protected, please contact Minnesota family law attorney Chris Banas at 651-361-8109.

The source of referenced Minnesota Statutes is the Office of the Revisor of Statutes, State of Minnesota, Copyright 2008. All rights reserved.

Domestic violence is a serious issue in divorce and custody cases, not only in terms of the civil and criminal effects, but also in the direct impact it will have on your chances for custody. To put it simply, a finding of domestic violence (order for protection in civil court or a criminal conviction of domestic violence) can ruin a party’s chance for custody.

1. Do not put yourself in a situation where it is likely an argument with your spouse will ensue. A finding of domestic abuse by one spouse against the other makes any custody battle very difficult since there is a presumption under Minnesota law that an abuser should not have custody. The specific language of the statute states: (d) whether domestic abuse, as defined in section 518B.01, has occurred between the parents. The court shall use a rebuttable presumption that upon request of either or both parties, joint legal custody is in the best interests of the child. However, the court shall use a rebuttable presumption that joint legal or physical custody is not in the best interests of the child if domestic abuse, as defined in section 518B.01, has occurred between the parents. (Go to Minn. Statute § 518.17 for the full text of the statute.) Copyright © 2007 by the Office of the Revisor of Statutes, State of Minnesota.  All rights reserved.
2. Do not yell, grab, hit, or throw anything in the presence of your spouse or, even more significantly, in the children's presence. If your spouse tries to incite you, walk away. Something as simple as blocking someone’s exit from a room may be considered abusive.
3. If you are being abused or are in fear for your safety or for the safety of your children, call 911 right away.
4. If you are accused of being physically abusive, do not make any statements - to anyone! Call an attorney right away. Remember, statements you make to the police (and to others) can be used against you in a later proceeding. Assert your right to remain silent.

In civil court, a finding of domestic abuse will result in the issuance of an Order for Protection. An Order for Protection is a civil order (not a criminal conviction) directing the abusing party (Respondent) to, among other things, stay away from the abused (Petitioner) party's residence or employment. When there are children involved, a temporary custody award will be made. An Order for Protection is usually put into effect for one (1) year, and may be extended beyond one year for good cause. Below are some excerpts from an actual order:

• NOTICE ABOUT ARREST AND JAIL: A violation of this Order may be a misdemeanor, gross misdemeanor, or felony. A misdemeanor violation may result in up to 90 days in jail, or $1,000.00 fine, or both. A repeat violation may be a gross misdemeanor, and may result in up to one year in jail, or $3,000.00 fine, or both. A police office must arrest and take into custody a person whom the officer believes has violated this Order.
• NOTICE ABOUT DEPORTATION AND ENFORCEMENT: A violation of this Order for Protection is a deportable offense. If you are not a United States citizen, a violation of this Order could result in your deportation. This Order for Protection is enforceable in all 50 states, the District of Columbia, tribal lands, and the United States territories. Violation of this Order for Protection may subject the Respondent to federal charges and punishment.
• NOTICE ABOUT FIREARMS: The Respondent must not possess, ship, transport, or receive any firearm or ammunition while this Order is in effect.
• NOTICE ABOUT OTHER CASES: Both parties are notified that in any other case involving parenting time (visitation), the Court will consider this Order for Protection if the Petitioner so requests.

If you and your spouse/partner are still living in the same house, be sure to discuss with your attorney early on any concerns you may have about your spouse's temper or abusive tendencies.  Do you believe your spouse is violent or could be violent?  Do you believe your spouse would lie about what happened during an argument?  Do you believe he or she would say you hit, grabbed or pushed him or her?   If you answered YES to any of the above, you should call your attorney immediately. Disputes "behind closed doors" are very difficult to defend, and not all domestic disputes involve the police or any written report for that matter. Sometimes I advise parties to physically separate themselves early on in the proceedings to eliminate even the chance of a spouse making a claim of domestic abuse.

Learn More -- Visit our articles and resources for more Minnesota family law information on Minnesota Divorce,  Child Support & Spousal Maintenance, Custody & Parenting Time and More.

If you would like to have a consultation with a Minnesota divorce lawyer, please contact attorney Chris Banas at  651-361-8109.

What is "legal custody"? How does it differ from "physical custody"? And, who is the "custodial parent"?

"Lawyer Speak" can be frustrating to listen to sometimes. To familiarize yourself with some of the common family law terms (and what they mean to your Minnesota divorce case), see the list of definitions below.

MINNESOTA DIVORCE / FAMILY LAW DEFINITIONS AS DEFINED IN MINNESOTA STATUTE 518.003

• Child Custody. In Minnesota, child custody involves legal custody and physical custody.  Read about Minnesota Child Custody: Legal Custody and Physical Custody.
• Legal Custody. In Minnesota, "legal custody" means the right to determine the child's upbringing, including education, health care, and religious training.
• Joint Legal Custody. "Joint legal custody" means that both parents have equal rights and responsibilities, including the right to participate in major decisions determining the child's upbringing, including education, health care, and religious training.
• Physical Custody. In Minnesota "physical custody and residence" means the routine daily care and control and the residence of the child.
• Joint Physical Custody.  "Joint physical custody" means that the routine daily care and control and the residence of the child is structured between the parties.
• Custodial Parent or Custodian. "Custodial parent" or "custodian" means the person who has the physical custody of the child at any particular time.
• Custody Determination. In Minnesota, "Custody determination" means a court decision and court orders and instructions providing for the custody of a child, including parenting time, but does not include a decision relating to child support or any other monetary obligation of any person.
• Custody Proceeding. "Custody proceeding" includes proceedings in which a custody determination is one of several issues, such as an action for dissolution, divorce, or separation, and includes proceedings involving children who are in need of protection or services, domestic abuse, and paternity.
• Maintenance. "Maintenance" means an award made in a dissolution or legal separation proceeding of payments from the future income or earnings of one spouse for the support and maintenance of the other.
• Marital property and Exceptions. "Marital property" means property, real or personal, including vested public or private pension plan benefits or rights, acquired by the parties, or either of them, to a dissolution, legal separation, or annulment proceeding at any time during the existence of the marriage relation between them, or at any time during which the parties were living together as husband and wife under a purported marriage relationship which is annulled in an annulment proceeding, but prior to the date of valuation under under Minnesota law: 1. All property acquired by either spouse subsequent to the marriage and before the valuation date is presumed to be marital property regardless of whether title is held individually or by the spouses in a form of co-ownership such as joint tenancy, tenancy in common, tenancy by the entirety, or community property. Each spouse shall be deemed to have a common ownership in marital property that vests not later than the time of the entry of the decree in a proceeding for dissolution or annulment. The extent of the vested interest shall be determined and made final by the court pursuant to section 518.58. If a title interest in real property is held individually by only one spouse, the interest in the real property of the nontitled spouse is not subject to claims of creditors or judgment or tax liens until the time of entry of the decree awarding an interest to the nontitled spouse. The presumption of marital property is overcome by a showing that the property is nonmarital property.
• Nonmarital property. "Nonmarital property" means property real or personal, acquired by either spouse before, during, or after the existence of their marriage, which (a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse; (b) is acquired before the marriage; (c) is acquired in exchange for or is the increase in value of property which is described in clauses (a), (b), (d), and (e);  (d) is acquired by a spouse after the valuation date; or (e) is excluded by a valid antenuptial contract.
• Mediation. "Mediation" means a process in which an impartial third party facilitates an agreement between two or more parties in a proceeding.
• Parenting time. "Parenting time" means the time a parent spends with a child regardless of the custodial designation regarding the child.
• Pension plan benefits or rights. "Pension plan benefits or rights" means a benefit or right from a public or private pension plan accrued to the end of the month in which marital assets are valued, as determined under the terms of the laws or other plan document provisions governing the plan, including section 356.30. Subd. 7.
• Private pension plan. "Private pension plan" means a plan, fund, or program maintained by an employer or employee organization that provides retirement income to employees or results in a deferral of income by employees for a period extending to the termination of covered employment or beyond. Subd. 8.
• Public pension plan. "Public pension plan" means a pension plan or fund specified in Minnesota Statutes section 356.20, SUBDIVISION 2, or 356.30, SUBDIVISION 3, the deferred compensation plan specified in section 352.96, or any retirement or pension plan or fund, including a supplemental retirement plan or fund, established, maintained, or supported by a governmental subdivision or public body whose revenues are derived from taxation, fees, assessments, or from other public sources.
• Residence. "Residence" means the place where a party has established a permanent home from which the party has no present intention of moving.

Learn More -- Visit our articles and resources for more Minnesota family law information on Minnesota Divorce,  Child Support & Spousal Maintenance, Custody & Parenting Time and More.

If you would like to have a consultation with a Minnesota divorce lawyer, please contact attorney Chris Banas at  651-361-8109.

The source of the Minnesota Divorce, Minnesota Marriage Dissolution and Minnesota Family Law definitions is Minnesota Statutes 518.003.  Copyright © 2007 by the Office of the Revisor of Statutes, State of Minnesota.  All rights reserved.  These definitions are used in Hennepin Family Court and in other counties, including Ramsey, Dakota, Washington and Anoka.

Parties to Hennepin County divorce and custody proceedings must appear before the judge assigned to their case as early as three to four weeks after the filing of the initial papers.

The first appearance in Hennepin County Family Court  is called an Initial Case Management Conference (ICMC). Below is an article written by the Honorable Lucy Wieland, Chief Judge of the Fourth Judicial District.

Reducing the Pain of Divorce
Lucy Wieland, Chief Judge of Fourth Judicial District - February 13, 2007

Divorce is never easy. The pain and loss to family members are immeasurable Over the last three years, the HENNEPIN COUNTY FAMILY COURT has focused on reducing the trauma of divorce by undergoing a quiet but dramatic transformation in how divorces are handled. Today, families can go through Family Court quickly, economically, and with less acrimony by agreeing to use up to three innovative programs and by negotiating in good faith.

It starts with the Initial Case Management Conference (ICMC), which occurs about three weeks after the parties' DISSOLUTION or PATERNITY case has been filed. Here, the parties and their attorneys meet with their assigned judge in an informal setting, everyone speaks freely and an attempt is made to resolve as many issues as possible. To help resolve any remaining issues, the parties may select from a menu of specifically designed settlement programs.

If the parties need help resolving financial issues, such as spousal maintenance or dividing marital assets, they can choose the FINANCIAL ISSUE EARLY NEUTRAL EVALUATION (FENE) PROGRAM. A neutral expert compiles all the necessary financial information, listens carefully to the parties' respective positions, studies the material, offers candid assessments regarding the strengths and weaknesses of each issue and helps the parties negotiate a resolution. The expert’s fees are determined on a sliding scale basis at a fraction of the normal rate. To date, 70 percent of the cases have settled entirely, averaging 59 days to resolution, and costing less than $1,000 for neutral expert fees. While the parties may incur additional charges for their lawyers, overall they end up paying a fraction of the costs associated with traditional divorce litigation and the whole process is completed in less than three months.

Hennepin County also offers a SOCIAL ISSUE EARLY NEUTRAL EVALUATION (SENE) designed to resolve custody and parenting time issues. Because it is extremely important to keep children out of the middle of messy divorce proceedings, the SENE is designed to happen even faster than the FENE. Parents selecting the SENE process are matched with two custody experts, always one male and one female, who meet with the parties, listen carefully to their respective positions, gather any necessary additional information, consult with each other to determine whether they view the issues the same way, and then provide the parties with their candid assessments and negotiate a settlement, all within thirty days after the initial case management conference. So far, 60-65 percent of all SENE referrals result in total settlements, while another 20 percent result in partial settlements.

Families opting for the SENE program often save a college education worth of costs and expenses, minimize emotional harm to their children, and discover that they can co-parent in a civilized, respectful way despite their divorce Even when the entire case does not settle, partial settlements result in far less expensive proceedings, with less potential harm to the children.

Occasionally, parents return to court because one wants to modify the existing custody arrangements. The Ready Response Program directs the parents and child to a custody evaluator serving as the Ready Response officer of the day. The Ready Response officer meets with the parents and child on an emergency basis and reports back to the court and the parents on the same day.

For example, a mature teenage girl may be telling her mother that she wants to move in with her; and telling her father that she wants to remain living with him. Both parents come to court believing that they are following the child's wishes. Rather than go through long drawn out litigation to determine the child's true preference, the Ready Response Program may be utilized. The Ready Response officers are skilled interviewers and can help determine what the child really wants. It is often much easier for a child to be candid in a setting that does not require the child to say something in the presence of a parent that might hurt that parent's feelings. On many occasions the Ready Response interview provides enough valuable information that the parents are able to negotiate a resolution and avoid a protracted court battle.

For more information on these and other programs, visit FAMILY COURT on the web. (See Links.)

For a consultation with a Hennepin County divorce attorney, please contact attorney Chris Banas at 651-361-8109.  He has written numerous articles on information on Minnesota Divorce, Child Support & Spousal Maintenance, Custody & Parenting Time and More.  Learn more about Hennepin County Custody and Parenting Time, Hennepin County Family Court divorce and child custody definitions and the Do's and Don'ts of Hennepin County Family Court Proceedings.